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www.safatenergy.comSafat Energy Holding Company K.S.C.P.
Company listed on the Kuwait Stock Exchange
Hawalli - Al-Safat Tower - Beirut Street - Opposite Al-Qadessya ClubTel.:1877777 / 22675000 Fax: 22675346
H.H. SHEIKHSABAH AL-AHMAD AL-JABER AL-SABAH
Amir of the State of Kuwait
H.H. SHEIKHNAWAF AL-AHMAD AL-JABER AL-SABAH
Crown Prince of the State of Kuwait
H.H. SHEIKHJABER AL-MUBARAK AL-HAMAD AL-SABAH
Prime Minister of the State of Kuwaitwww.safatenergy.com
Safat Energy Holding Company K.S.C.P. Company listed on the Kuwait Stock Exchange
Hawalli - Al-Safat Tower - Beirut Street - Opposite Al-Qadessya ClubTel.:1877777 / 22675000 Fax: 22675346
Senergy Holding K.S.C.P
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Annual Report
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To be the pioneers in providing oilfield services in our region.
Maximize the return to the shareholders through leadership in the oil services in the region, increase the Company’s activity in the drilling operations to cover all Middle east region, taking part in new projects of economic feasibility.
Our Vision
Our Mission
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Index
PageContents
7Board of Directors
8 - 9Chairman’s Massage
10Group of Senergy Holding Affiliated Companies
11Senergy Holding in Brief
12About our subsidiaries
13Financial Indicators
14 - 15Report of the sharia Committee
16 - 17Audit Committee Report for 2018
18 - 33Corporate Governance Report for 2018
34Report on transactions with related parties
35 - 84Consolidated Financial Statements & Independent auditors’ report
Board of Directors
Mr. Talal Zaben Al HathalChairman
Mr. Naser Bader Ahmad Al SharhanVice Chairman & CEO
Mr. Abdulrazaq Zaid Al DobayanBoard Member
Mr. Ahmad Mahmoud Yahya Al YahyaBoard Member
Mr. Malik Maher Abdullah Marafie Board Member
Mr. Bassam Mohammad Taleb WaheediBoard Member
Mr. Hasan Hashem Sayed Al MousawiBoard Member
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Senergy Holding K.S.C.P
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Chairman’s Message
Dignified Shareholders,,,,
Peace and Blessings of Allah Be Upon You,
On behalf of myself and the other respected members of the board of directors, it is a pleasure to meet you today in order to share with you a brief report about the company’s results and activities for the year ended December 31st, 2018.
Since the composition of the board of directors on June 21st, 2017, the Board has been keen to enhance the overall strategy of the parent company and the companies affiliated thereto by reaffirming the emphasis on the Kuwaiti oil market in preparation for moving to perform contracts in the field of oil services with values and volumes higher than the current value, particularly after the company’s demonstration of a high competitive potential through the execution of its works in the best way over the past 6 years, and in a high efficiency that matches the other foreign companies working in the same field.
Driven by this vision, and with the existence of promising opportunities in the local market to implement the works and obtaining contracts with doubled values in consistent with the company’s strategic plan, the company has increased its ownership in both of its affiliated companies; Senergy Energy Services Co. (the company increased its percentage of ownership from 91% to 94%), (and the latter has also increased its ownership’s percentage in Eastern National Oilfield Services Co. from 67.7% to 86% during the first quarter of 2018.
The Existing Contracts The affiliated company (i.e. Eastern National Oilfield Services Co.), which is a Kuwaiti national company working in the field of oil wells’ logging, is carrying out its second contract with Kuwait Oil Co., since it was able to build a successful business record over the past six years through carrying out this contracts which qualified it enter the competition of obtaining contracts with higher values and more varied services in line with the overall strategic plan of the company.
The company is entering into other contracts in Basra “South of Iraq”, since it owns a business base in this region, and in spite of the poor value of the contract, the company maintains its position in the aforesaid region as a part of its strategic plan to work in the local markets and the Arabian Gulf region, in addition to the company’s historic and distinguished business record in this region which was built by it during the past years, and it cares for evaluating the activity on a regular basis to take advantage of the valuable opportunities.
The company is currently negotiating with one of the companies in Sudan, in order to make an agreement for implementing a services’ contract and agree on the conditions and guarantees of payment, in preparation for signing a short-term contract of services which shall not exceed one year, after which the situation shall be valued in terms of deciding whether to expand the business in this country or not.
The affiliated company, Eastern International Wells Testing Services Co. – which is a Kuwaiti company with an affiliated company in Pakistan working in the field of testing the oil wells, also executes many contracts in the Islamic Republic of Pakistan and owns a distinguished base of customers.
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Talal Zaben Al-HathalChairman of the Board of Directors
Future Plans Being a national company, among a number of the national companies that could be counted on one hand in addition to carrying out services’ contract with Kuwait Oil Company for more than six years, gives the power and excellence to the company for enhancing its position in the local market, particularly with the country’s future concentration on granting greater opportunities as well as the gradual expansion in assigning more woks to the national companies. As a result, one of the company’s most important future plans is to provide the proper qualification for its affiliated companies in the other fields, since it was able to qualify its affiliated company “i.e. Eastern National Oilfield Services Co.” in the field of testing the oil wells in Kuwait, and the work is ongoing on qualifying thereof in the other fields, together with considering the entering to the other gulf markets.
Financial IndicatorsThe reason behind the retardation in the company’s results and incurring losses in 2018 amounted to K.D. 534000, compared to a profit which was amounted to K.D. 71000 in 2017, is the two unrepeatable sources of revenues during 2017: • MakingaprofitfromsellingfixedassetswithavalueofK.D.759000.• Recoveringthedeclineinthevalueoffacilitiesandequipmentwithavalueof1.13MillionKuwaitiDinar.
The sales of the company in 2018 amount to 2.9 Million Kuwaiti Dina, compared to 3.1 Million Kuwait Dinar in the previous year 2017. While the operating loss has declined with a value of K.D. 749000 to become 1.062 Million Kuwaiti Dinar, compared to 1.811 Million Kuwaiti Dinar in 2017. The value of the company’s current assets is 8.24 Million Kuwaiti Dinar which equals 3.49 of the value of its current liabilities amounted to 2.359 Million Kuwaiti Dinar.
While the total amount of the company’s assets is 20.07 Million Kuwaiti Dinar, compared to an amount of 22.89 Million Kuwaiti Dinar in 2017, and the total amount of the liabilities is 2.98 Million Kuwaiti Dinar, compared to an amount of 4.035 Million Kuwaiti Dinar in 2017.
With regard to the rights of shareholders, it is amounted to 14.77 Million Kuwaiti Dinar, compared to an amount of 14.81 Million Kuwaiti Dinar in 2017, knowing that the company has not any liabilities related to related to indebtedness towards any financial entity.
There are some legal cases which relate to the parent and affiliated companies, and the department follows-up those cases, and no potential obligations, related to the aforementioned cases, are existing until the date of preparing this report.
In brief, the company is working to foster its activity in Kuwait and the Arabian Gulf region more broadly, and it made a remarkable progress in this field, through which it proved its abilities in the implementation and performance. The company is seeking, Allah willing, to reap the benefits of this approach in the coming years.
In conclusion, on behalf of myself and my colleagues; members of the board of directors, I would like to extend my thanks and appreciation for your continued trues and support, and we also pray that Allah Almighty will grant us the success in our efforts made to serve beloved country (State of Kuwait), under the leadership of His Royal Highness the Emir of Kuwait , His Royal Highness the Crown Prince and His Highness the Prime Minister, may Allah bless them all.
Allah is the Grantor of Success,
Senergy Holding K.S.C.P
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Group of Senergy Holding Affiliated Companies
EASTERNTESTING SERVICES - PKS
EASTERNTESTING SERVICES - KWI
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Senergy Holding in Brief
Senergy Holding is a holding company listed on the Kuwait
Stock Exchange with paid up capital 20,000,000 million KD
specialized in the energy operations and works with its
group to support the energy sector in the region.
During a very short period of time Senergy Holding was
able to establish itself as one of the recognized oil services
provides. Also, SEH was able to acquire majority shares in
many long established companies in the region, a step very
important in the road to achieve the company’s vision of
becoming one of the recognized
“integrated service companies”.
Senergy Holding K.S.C.P
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About our subsidiaries:
1. Senergy Services for Energy Services Company K.S.C (closed) (Kuwait - Owned 94.57%).
Founded in 2002 with a capital of 9.455 million KD. Providing services associated
with the activities of oil wells and maintenance, as well as providing services related
to energy (electricity and water) in the sector. The company is classified and with
the Central Tendering Committee and provides miscellaneous services in various
countries in the region.
2. Eastern National Oil Field Services (Kuwait - Owned 86.71%).
Founded in 2004. Specializing in Wireline logging works primary in Iraq & Pakistan
with plans to expand in the region.
3. Eastern Testing (Pakistan - Owned 70%).
Founded in 2009, and is specializing in providing testing services.
4. Gulf International General Trading & Contracting Co (Kuwait - Owned 86.71%).
The Group’s representative arm specialized in obtaining commercial agencies for
services and equipment needed by the group.
5. Eastern Industrial & Petroleum Holding (Bahrain- Owned 100%).
Founded in early 2008, currently the company is not operating and the parent
company is evaluating the liquidation of the company.
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Financial IndicatorsSenergy Holding K.S.C. (PUPLIC)
MAJOR FINANCIAL INDEXES AS OF 31/12/2018
20182017DETAILS 20,069,70122,895,205TOTAL ASSETS
(534,690)71,870NET PROFIT / (LOSS)
14,768,43214,807,413TOTAL SHAREHOLDERS EQUITIES
7474SHARE BOOK VALUE (FILLS)
(2.68)0.36EARNING PER SHARE (FILLS)
Growth in Assets
Shareholders Equity
Earning Per Share (Fils)
Growth in Profit (loss)
Book value per Share (Fils)
Senergy Holding K.S.C.P
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The Sharia Report of Senergy Holding Co.Fatwa and Shariah Supervisory Board
Legal Control Authority Report
To Messrs. Shareholders of Senergy Holding Co.
Hawalli - State of Kuwait
The auditing purpose and scope:
We audited the contracts and transactions performed by Senergy Holding Co. (The Company) and its subsidiaries (hereinafter collectively referred to “Group”) during the financial year ended on 31/12/2018 to give the opinion regarding the company’s compliance with the Islamic Sharia’a Provisions approved by us with considering the legal standards issued by the legal Council of Accounting and Revision board of Islamic Financial Institutions (AIOVI) and the decisions of Juridical Doctrines.
The management’s responsibility for legal compliance:
The compliance responsibility in performing the contracts and transactions according to the provisions of Islamic Shari’a lies on the company management. The management is responsible for the internal legal control which it sees necessary in order to perform the contracts and transactions according to the provisions of Islamic Sharia’a. The responsible departments in the company for performing the checked transactions and its performance stages are represented in the board of directors.
Independency, other moral requirements and quality control:
We comply the independency and other moral requirements as mentioned in the code of morals of accountant and external auditor of Islamic Financial Institutions issued by the Accounting and Revision board of Islamic Financial Institution and Code of Moral Conducts of professional accountants issued by the International Board of Moral Conducts Standards of Accountants upon which was established upon the basic standards of transparency, subjective, professional qualification, due diligence, confidentiality and professional behavior.
We comply with the requirements of quality control standard No. 1 regarding the quality control of offices which perform the auditing and revision process of financial statement, other assurance process and related services processes. According to these requirements, we shall keep and hold comprehensive system of quality control including the authenticated policies and procedures regarding the compliance with the moral requirements, professional standards, the applied systematic and organizational requirements.
The responsibility of Legal Control Authority and Description of performed works:
Our responsibility is represented in giving the opinion in the company’s compliance with the provisions of Islamic Sharia’a upon our auditing process. We have audited according to the governance and auditing standards issued by the Accounting and Revisions Board of Islamic Financial Institutions especially the auditing standards of Islamic Financial Institutions No. 6 regarding the external legal auditing (independent assurance process of the Islamic Financial Institution compliance with the provisions of Islamic Sharia’a) and according to the international standards of assurance process issued by the auditing standards and internal assurance board especially the assurance standard No. 3000 regarding the assurance process except the auditing or revision process of historical financial information. These standards require that we shall comply with the moral behavior requirements of profession and to plan and perform the auditing process in order to get reasonable assurance that the company complies with the provisions of Islamic Sharia’a. The reasonable assurance is high level of assurance but it doesn’t ensure that the legal auditing process will always reveal the legal violations if any.
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The auditing process includes performing some procedures in order to get auditing proofs about the compliance level of provisions of Islamic Sharia’a and we believe that the auditing proofs which we get are enough and suitable to be the basis for giving our auditing opinion. As part of the legal auditing process, we practice the professional evaluation and we keep the professional doubt throughout the auditing period and we do the following:
(a) Specify and evaluate the legal non-compliance risks, design and perform the auditing procedures to comply with these risks, get sufficient and suitable auditing proofs to be the basis to give our opinion.
(b) Form understanding about the internal legal control system related to the auditing process in order to design the suitable auditing procedures within the current circumstances not for giving the opinion about the effectiveness of internal legal control system of company.
(c) Review and check the following contracts and transactions:- Financial statements of company and its attachments. - Signed contracts within year- Investment operations during year- Reports submitted to supervisors and internal audit reports.- Judicial sentences issued during year- Charity fund (purification account) and follow up the usages during year, additions during year and
balance at the end of year- Company’s Zakat
(d) Liaise with the management regarding the scope and time of planned auditing and important results of auditing process including any essential weakness point in the internal legal control system which we specify within the auditing process.
(e) In order to achieve our duties, we liaise with the company management and perform the field auditing on the following dates: 1-4 of 18 April 2019.
Opinion:
In our opinion the contracts and transactions concluded by Senergy Holding Co.. and its subsidiaries (Group) within the financial year ended on 31/12/2018 were done according to the Islamic Sharia’a Provisions approved by us.
Zakat:
The company’s zakat was calculated according to the principles approved by us and under our supervision, the due zakat against shareholders (investors) for the financial year ended on 31/12/2018 are /83 972/ Kuwaiti Dinar and the value of one share is /0.00042/ K.D. to be known that the responsibility for paying the shareholders’ Zakat lies on them.
Regarding stores, the equation of Zakat is:
Number of Owned shares x market value of share in Zakat date x (2.5% for Hijri Year / 2.577% of calendar year).
Kuwait, 21/04/2019
Sheikh/ Mohamed Mahmoud Al AbedMember of Legal Control Authority
Sheikh Mohammad F. Al-BaderMember of Legal Control Authority
Dr. Abdul Bari MeshaelHead of Legal Control Authority
Senergy Holding K.S.C.P
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Audit Committee Report for 2018
Within the application of proper governance rules in company, board of directors form independent committee emerged from it entitled auditing committee in order to enable it in performing its related missions effectively especially supervision and revision of company accounts and financial statement and to ensure its effectiveness and transparency and to ensure the suitability and effectiveness of applied internal control systems in the company.
This committee works according to approved convention by board of directors explaining its work period, powers, authorities, missions, and responsibilities and how the board of directors controls it as follows:
committee formation date and term
21st of June 2018, membership term, same term of their membership in board of directors.
number of meeting held by the committee during year
5
committee formation Mr. Malik Maher Marefi, head of committeeMr. Abdul Razaq Zeed Al-DhabianMr. Hassan Hashem Sayed Al-Mousawi
main missions and responsibilities of committee
- Review the quarter and annual financial statement before displaying them to the board of directors with giving the required recommendation concerning it to BoD.
- Recommend to the board of directors to appoint, re-appoint or change the external auditor and evaluate his fees after ensuring their independency and reviewing their appointment letters.
- Evaluate the sufficiency of applied internal control systems inside company with giving the required recommendation concerning it to BoD.
- Review and approve the internal auditing plans suggested by internal auditor in addition to review the results of internal auditing reports and ensuring taking all required procedures concerning it.
- Review the results of control authorities report and ensure taking the required procedures concerning it.
- Ensure that the company complies with applicable and related laws, policies, systems and instructions.
important accomplishments of committee during year
- Appoint external auditors of company for ended year on 31st of December 2018
- Reform the internal auditing committee and elect its president and secretary.
- Recommend to authorize external entity to perform the internal auditing services.
- Review the quarter and annual financial statement.
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The company has internal auditing unit in the organizational structure (external entity) of company
which enjoys the independency through following the auditing committee and in turn to the board
of directors. The company depends in its internal auditing process on contracting with external
specialized entity to perform this mission and the external entity works on reviewing and evaluating
the applied internal control system of company according to the approved policies by board of
directors and the internal auditing plans approved by the auditing committee and preparing the
required periodic reports in this regard and displaying them on the auditing committee.
An independent auditing office, rather than the authorized auditing office to review and evaluate
the internal control systems, is authorized to review and evaluate the internal auditing performance
periodically each three years and to send copy of this report to auditing committee and board of
directors.
The company depends on group of control and internal control systems which cover all company
activities through preparing and approving group of structures, policies and procedures aiming to
specify the powers, authorities and responsibilities and separation of missions.
The board of directors works on following the internal control systems through raised reports by
control missions and committees in company.
Moreover, an independent auditing office is authorized to evaluate and review the internal control
systems and prepare the report in this regard and to send copy thereof to the auditing committee
and board of directors.
The committee held periodic meetings with external auditor, twice time with internal auditor of
company without attendance of executive department.
We want to mention that there is no contradiction between the recommendation of auditing
committee and decisions of board of directors.
Malek Maher Maarafi Head of Auditing Committee
Senergy Holding K.S.C.P
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Corporate Governance Report for 2018
Company OverviewSenergy Holding Company K.P.S.C has been established in State of Kuwait on March 22nd, 1983, and
the company’s shares have been enlisted on the Kuwait Boursain 1987 according to the Companies
Law, and by virtue of the resolution of the extraordinary general assembly held on April 7th,
2016 the shareholders have agreed to change the company’s name from Safat Energy Holding
Company K.P.S.C to Senergy Holding Company K.P.S.C.
In accordance with the extraordinary general assembly meeting held on May 15th, 2007, the parent
company conducts its activities according to Islamic Shari’a. The main activities as per the parent
company’s articles of association are as follows:
- Owning shares of Kuwaiti or foreign shareholding and limited companies as well as participating
in forming, administrating, financing, and providing third party guarantees for these companies.
- Financing companies owned or guaranteeing them against third parties that the contribution ratio
of the holding company in the capital of these companies shall not be less than 20 % at least.
- Owning Industrial rights for patents, trade names, designs and leasing the same to other companies
for their use inside or outside Kuwait.
- Owning movable and real estate properties that are necessary to practice its activities in accordance
to the law.
- Use of surplus funds available with the parent company by investing in portfolios managed by
specialized companies.
The address of the company’s registered office is at Hawally – Beirut Street – Al-Safat Group
Headquarters – Floor No. 7 – P.O. Box 27728 – Al-Safat 13138 – State of Kuwait.
The authorized, issued and fully paid up capital is K.D. 20,000,000 consisting of 200,000,000 shares at
nominal value of 100 fils each and all shares are in cash. The following are the major shareholders as
of December 31st, 2018
No. Name of Shareholder No. of Shares Rate %
1 Al Khair Global for Buying and Selling Shares 39,798,016 19.899
2 Al Safat Investment Company 33,645,991 16.823
3 Baitac Capital Investment –Electronic 1 15,622,544 7.811
Corporate Governance
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Corporate Governance
Governance Framework of Senergy Holding Company K.P.S.CThe principles of governance are to adhere with the work values and ethics. Also, it cares with managing the company, its culture, policies and manners with which it deals with different related parties. Besides, adhering to the accuracy in disclosing the information related to financial position of the company at suitable time and its performance and ownership.
Company’s View on Governance Principles: The general framework of governance principles in the company depends on the independency of board of directors and separation between the role of control board of executive management and board committees, which include independent member. Also, the company considers applying the governance principles an integral part of its process as its adheres to the principles upon which the best practices of managing companies are depended, rather than its permanent compliance on applying them within the period of revision.
The board of directors complies with continuous application of initiatives calling to developing the governance principles as it has interest for all related parties and to enhance the confidence levels at its stakeholders and interested parties.
Senergy Holding K.S.C.P
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Corporate Governance
Application of the Governance RulesFirst Rule
Building a Balanced Structure for the Board of Directors
• A brief about the board of director’s composition in the following manner:
Member’s Name Position
Designation(Executive/
Non- Executive
Independent)
Qualification and Practical
Experience
Date ofElection
MR. Talal Zaben Al-Hathal Chairman Non-Executive Master Degree in Economics 21/6/2017
MR. Naser Bader Ahmad Al-Sharhan
Vice Chairman
and Executive
Director
Executive
Bachelor of Political
Science and Marketing
21/6/2017
MR. AbdulrazaqZaid Al-Dobayan Board Member Independent
Bachelor of Civil
Engineering21/6/2017
MR. Ahmad Mahmoud Yahya Al-Yahya Board Member Independent
Bachelor of Chemical
Engineering21/6/2017
MR. Malik Maher Abdullah Marafie Board Member Independent Bachelor of
Finance - MBA 21/6/2017
MR. Bassam Mohammad Taleb Waheedi Board Member Non-Executive
Bachelor of Science – Statistics
21/6/2017
MR. Hasan Hashem Sayed Al Mousawi Board Member Non-Executive
Bachelor of Commerce – Accounting
21/6/2017
MR. Nashaat Naeem Daghmash Board Secretary Secretary
Bachelor of Economics - Business
Administration
21/6/2017
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Corporate Governance
• A b
rief
on
the
boar
d m
eeti
ngs,
acc
ordi
ng to
the
follo
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tails
:
Mee
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ecto
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No. 2
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No. 3
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8
Num
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tings
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9
Senergy Holding K.S.C.P
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Corporate Governance
• A brief on the implementation of the requirements of registration, coordination, and keeping the minutes of the company board of directors’ meeting
The board of directors secretary undertakes the tasks of writing the minutes of the board’s meetings which comprise the discussions and deliberations which took place during the meetings, the decisions taken and any reservations (if any). These minutes are signed by him and by all those present.
Further, there is a special register in which the minutes of the meeting are recorded in serial numbers for the year in which the meetings were held, indicating the place and date of the meeting, and its starting and ending hour to make it easy to refer to such minutes.
The minutes of meetings, records, reports and other documents submitted by and to the board are kept with the secretary.
Further, the secretary ensures that the board members follow the procedures approved by the board, ensures the notification of the board meeting dates at least three working days before the meeting, taking into consideration urgent meetings. This is in addition to ensuring that the board members can fully and promptly access the minutes of meetings, information and documents related to the company. This is in addition to undertaking to secure the proper communication and distribution of information and coordination between the board members and other stakeholders in the company under the supervision of the chairman.
Second Rule
Proper Identification of the Tasks and Responsibilities
• A brief on the method of the company’s identification of policies and responsibilities, the duties of each member of the board of directors and executive management, as well as the power and authorities delegated to the executive management:
The board of directors undertakes all the required authorities and powers for management of the company. The authorities, tasks and responsibilities of the board of directors are outlined in the company’s articles of association and the work code approved by the board, taking into consideration the terms of reference of the company’s general assembly.
Among the most significant of these tasks and responsibilities are the following: - Adoption of company’s strategy, objectives, work plans and estimated budgets. - Adoption of interim and annual financial statements. - Adoption of internal charters, regulations and policies. - Establishing and supervising a corporate governance system, including the preparation of annual
corporate governance report. - The formation of specialized committees emanating from the board. - Defining the powers delegated to the executive management. - Supervising and controlling the performance of the executive management. - Ensure periodically the effectiveness and adequacy of internal control systems.
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Corporate Governance
In addition to the obligations of the board of directors, the chairman is responsible for the company vis-à-vis others, and for the proper functioning of the board of directors in an appropriate and effective manner, including obtaining full and timely information, encouraging the development of relationship and efficient participation between the board of directors and the executive management, as well as other responsibilities.
Further, the responsibilities and tasks of the executive management are also determined in the policies adopted by the board of directors. The most prominent of these tasks and responsibilities are the following: - Implementation of the strategy and annual plans approved by the board of directors. - Implementation of all internal policies adopted by the board of directors. - Full responsibility for the overall performance of the company and its business results. - Establishing internal control systems and ensuring the adequacy and effectiveness of these
systems. - Preparing periodic reports on the company’s activities and presenting them to the board of
directors. - The board of directors also determines the powers delegated to the executive management, -
so that not party shall have exclusive powers to facilitate the process of accountability.
• Highlights of the board of directors achievements during the year: - Approval of 2018 estimated budget. - Approval of the financial statements for the year ended December 31st, 2017. - Assignment of external auditors for the year ended December 31st, 2018. - Approval of the financial information for the first, second and third quarters of 2018. - Resigning the percentage of ownership in Senergy Energy Services Co. K.S.C (Closed) “An Affiliated
Company” from 91.053 % to 94.577 %. - Resigning the percentage of ownership in Eastern National Oilfield Services Co. K.S.C (Closed) from
67.714 % to 86.714 %.
• A brief on the implementation of the requirements for the composition of specialized committees enjoying independence by the board of directors:
The board of directors has formed three independent committees to enable it to carry out its functions effectively and to supervise the various governance applications. These committees operate according to charters approved by the board of directors, which explain the duration of their work, their powers, duties and responsibilities and the method of the board’s control over them according to the following:
Senergy Holding K.S.C.P
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Corporate Governance
Nominations and Remunerations Committee Date of the committee formation and its duration
June 21st, 2017 – membership tenure is the same tenure of their membership in the board of directors.
Number of the meetings held by the committee during the year
1
Committee composition MR. Ahmad Mahmoud Yahya Al Yahya – Committee Chairman MR. Bassam Mohammad TalebWaheediMR. Naser Bader Ahmad Al Sharhan
Key tasks and responsibilities of the committee
- Recommending acceptance of nomination and re-nomination to the board of directors and executive management.
- Setting a clear policy for remuneration of board members and executive management.
- Determining the different segments of the remunerations granted, whether directly or indirectly.
- Developing job descriptions for executive members, non-execution members and independent members.
- Ensuring that the independence of the independent board member is non-abstinence.
- Annual review of the necessary skills required for board membership. - Conducting the annual evaluation of the performance of the board of directors, the
members of the board of directors and the committees of the board of directors, and submitting the performance evaluation report to the board in this regard.
Highlights of the committee achievements during the year
- Submitting the report of the remunerations granted during 2018 to the board of directors.
- Ensuring that the independent capacity for the independent board member is not lacking for the board members (MR. AbdulrazakZaid Al-Dobayan, MR. Ahmad Mahmoud Al-Yahya, and MR. Malik Maher Marafie).
Audit Committee Date of the committee formation and its duration
June 21st, 2017 – membership tenure is the same tenure of their membership in the board of directors.
Number of the meetings held by the committee during the year
5
Committee composition MR. Malik Maher Marafie – Committee Chairman MR. AbdulrazakZaid Al-DobayanMR. HasanHashemSayed Al Mousawi
Key tasks and responsibilities of the committee
- Reviewing the quarterly and annual financial statements before presenting them to the board of directors and make the necessary recommendations thereon to the board of directors.
- Recommending to the board of directors to appoint, reappoint or change the external auditor and assess their fees, after ensuring their independence and reviewing their letters of appointment.
- Evaluating the adequacy of the internal control systems applied within the company and making the necessary recommendations thereon to the board of directors.
- Technical supervision of the internal audit department in the company. - Reviewing and approving the internal audit plans proposed by the internal auditor,
as well as review the results of the internal audit reports and ensure the necessary action is taken in the respect.
- Reviewing the results of the reports of the regulatory bodies and ensuring that the necessary procedures are taken.
- Ensuring the company’s compliance with relevant laws, policies, resolutions and instructions.
Highlights of the committee achievements during the year
- Appointing external auditors for the year ended December 31st, 2018. - Discussing the 2018 estimated budget and submitting it to the board of directors. - Recommending outsourcing of the internal audit services. - Reviewing the quarterly and annual financial statements.
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Risk Management Committee Date of the committee formation and its duration
June 21st, 2017 – membership tenure is the same tenure of their membership in the board of directors.
Number of the meetings held by the committee during the year
4
Committee composition MR. HasanHashemSayed Al Mousawi – Committee Chairman MR. Ahmad Mahmoud Al-YahyaMR. Malik Maher Marafie
Key tasks and responsibilities of the committee
- Preparing and reviewing risk management strategies and policies before they are approved by the board of directors.
- Ensuring the existence of adequate resources and systems for the risk management. - Assisting the board of directors in identifying and assessing the acceptable level of
risk in the company. - Ensuring that the risk management personnel have a full understanding of the risks
surrounding the company. - Ensuring the independence of the risk management personnel from the activities
that result in the company being exposed to risks. - Preparing periodic reports on the nature of the risks to which the company is
exposed. - Review the issues raised by the audit committee that may affect the company’s risk
management.
Highlights of the committee achievements during the year
- Discussing the 2018 estimated budget and submitting it to the board of directors.- Approval of the committee report for 2017 and submitting it to the board of
directors.
• A brief on the method of implementing the requirements which permit the members of the board of directors to obtain accurate information and data in the right time:
The executive management provides full, accurate and timely information, data and documents to all members of the board of directors which enable them to carry out their duties and tasks efficiently and effectively. It also ensures that all periodic and non-periodic reports are prepared with a high degree of quality, comprehensiveness, consistency, conciseness and accuracy.
Third Rule
Selection of the Qualified Persons for the Membership of the Board of Directors and the Executive Management
• A brief on applying the requirements of the nominations and remunerations committee’s composition:
The board of directors has formed the nominations and remunerations committee according to the requirements of the Capital Markets Authority in the aforesaid manner in the above clauses.
The company has in place a policy adopted by the board of directors to grant remunerations comprising the identification of the chairman and members of the board of directors and identification of the various sectors of the remunerations offered to the personnel in line with the applicable and legal requirements.
• Report of the remunerations granted to the members of the board of directors and executive management:
Based on the requirements of the Capital Markets Authority, the tasks and responsibilities of the nominations and remunerations committee include preparing a detailed annual report on all the
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Corporate Governance
bonuses awarded to the members of the board of directors and the executive management. Thus, the report was prepared as follows: In accordance with the award policy approved by the board of directors, annual bonuses are related to the performance of the company during the year, taking into account the following: - The legal and regulatory requirements in force are taken into account when determining the
remuneration of the chairman and members of the board of directors and employees. - The remunerations of the employees are dividing into: the fixed remuneration segment (including
salary, allowances and other incentives) and the variable remuneration segment (related to the employee’s annual performance evaluation); and the end-of-service remuneration’s segment.
Details of the remunerations, benefits and advantages granted to the chairman and members of the board of directors and executive management:
Chairman and Members of the Board of Directors:
A recommendation of not paying remunerations to the chairman of the board of directors has been given, and this is subjected for the approval of the general assembly. Executive Management: During 2018, bonuses have been paid to the CEO and executive management members. Further, kindly be informed of the following description of the fixed and variable remuneration segment and end-of-service indemnity from the parent company:
Description Amount (K.D.)
Fixed Remuneration Segment Salaries 83,400
Variable Remuneration Segment Performance Bonuses -
End-of-Service Remuneration’s Segment. End-of-Service 9,519
Total 92,919
During 2018, bonuses have been paid to the chairman, board of directors and the executive management from the affiliated companies. Further, kindly be informed of the following description of the fixed and variable remuneration segment and end-of-service indemnity from the affiliated companies:
Description Amount (K.D.)
Fixed Remuneration Segment Salaries 49,992
Variable Remuneration Segment Performance Bonuses -
End-of-Service Remuneration’s Segment. End-of-Service 4,807
Total 54,799
There are no substantial deviations from the remunerations policy adopted by the board of directors.
Fourth RuleEnsuring the Integrity of the Financial Reports
• Board of Directors and executive management’s written undertakings for the soundness and integrity of the prepared financial reports:
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Acknowledgement and Undertaking (Integrity and Fairness of the Data)We, the Chairman and the members of the Board of Directors of Senergy Holding Co., hereby acknowledge and undertake that all the financial statements provided to the external auditors are accurate and integral, and that the statement of the company’s financial reports has been properly and fairly presented in compliance with the International Accounting Standards applied in the State of Kuwait and as authorized by the Capital Markets Authority, and the same are reflecting the company’s financial position as on December 31st, 2018 on the basis of the information and reports received from the executive management and the auditors, together with the due diligence in order to verify the integrity and accuracy of this reports.
Name Position Signature
MR / Talal Zaben Mahrout Al-Hathal Chairman
MR / Naser Bader Al-Sharhan Vice-Chairman
MR / Abdulrazaq Zaid Al-Dobayan Member of the Board of Directors
MR / Ahmad Mahmoud Al-Yahya Member of the Board of Directors
MR / Malik Maher Abdullah Marafie Member of the Board of Directors
MR / Bassam Taleb Waheedi Member of the Board of Directors
MR / Hasan Hashem Sayed Al Mousawi Member of the Board of Directors
• Acknowledgement and Undertaking (Integrity and Fairness of the Data)
I, the CEO of Senergy Holding Co., hereby acknowledge undertake that all the financial statements provided to the external auditors are accurate and integral, and that the financial reports have been properly and fairly presented in compliance with the International Accounting Standards applied in the State of Kuwait and as authorized by the Capital Markets Authority, and the same are reflecting the company’s financial position as on December 31st, 2018 on the basis of the information and reports received from the executive management and the auditors, together with the due diligence in order to verify the integrity and accuracy of this reports.
Name Position Signature
MR / Naser Bader Al-Sharhan CEO
MR / Nashaat Naeem Daghmash Financial Manager
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• A brief onapplying the requirements of the auditing committee’s composition: The board of directors has formed the auditing committee as per the requirements of the Capital Markets Authority, and as per set forth in the above clauses.
• In case of any discrepancy between the recommendations of the auditing committee and the resolutions of the board of directors, a statement which elaborates and clarifies the recommendations and the reason or reasons, which made the board of directors not to abide thereto, should be included:
NIL.
• Ensuring the independence and impartiality the external auditors: The external auditors shall be nominated to the company based on a recommendation of the auditing committee to the board of directors, after ensuring that they are independent from the company and its board of directors and their non-involvement in any additional works to the company which aren’t within the scope of the reviewing and auditing works which may have an impact on the impartiality and independence, provided that the auditors were registered in the registry of the Capital Markets Authority. The ordinary general assembly shall further appoint the external auditors to the company in its annual meeting based on the board of director’s recommendation, and the external auditors shall attend the meetings of the general assembly and read the report prepared by them before the shareholders.
Fifth RuleEstablishing Proper Systems for the Risk Management and Internal Control
• A brief description of the application of the requirements of forming an independent department / office / unit for the risk management:
The company has a Risk Management Unit which enjoys independency by being accountable directly to the board of directors in the company organizational structure. In the risk management process, the company relies on entering into contracts with a specialized external body to undertake such tasks. The external body identifies, measures, and follows up all types of risks which the company may be exposed according to the policies approved by the board of directors, and also prepares the necessary periodical reports in this respect and submit it to the concerned committees and board of directors.
• A brief on applying the requirements of the risk management committee’s compositionThe board of directors has formed the risk management committee according to the requirements of the Capital Markets Authority in the aforesaid manner.
• A brief statementon the control systems and internal control: The company adopted a set of internal control and control systems covering all the activities of the company through the preparation and adoption of a set of structures, policies and procedures aimed at determining the powers and responsibilities and separation of tasks. The board of directors also follows up the internal control systems through the reports submitted by the committees and the supervisory functions in the company. In addition, an independent audit office is assigned to carry out an evaluation and review of the internal control systems and to prepare report thereon. A copy of this report shall be provided to the audit committee and the board of directors.
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• A brief statement on the application of the requirements of the independent internal audit department/office/unit’s composition:
The company has an independent internal audit unit through its subordination to the audit committee and following the board of directors in the organizational structure of the company. The company relies on contracting with a specialized third party to carry out these tasks. The external entity reviews and evaluates the internal control systems applied in the company in accordance with the policies adopted by the board of directors, and prepare the necessary periodic reports in this regard and submits it to the relevant committees and the board of directors. An independent audit office, other than the audit office assigned to carry out the evaluation and review of the internal control system, shall be assigned to audit and evaluate the performance of the internal audit on a regal basis every three years, and a copy of this report shall be provided to the audit committee and the board of directors.
Sixth RuleEnhancing the Professional Conduct and the Moral Values
• A brief on the business code which includes the standards and determinants of the professional conduct and moral values:
The company has a business code approved by the board of directors which includes the standards and determinants the consolidate the concepts, values and ethical principles of the company, members of the board of directors, executive management and all the employees.
• Summary of policies, and the mechanism of reducing conflict of interests: The company has a policy on reducing the conflict of interests, which is approved by the board of directors and include examples of conflict of interests, and how to be addressed and dealt with by the board members and executive management.
Seventh RuleAccurate and Timely Disclosure and Transparency
• A brief on the implementation of the mechanisms of accurate and transparent presentation and disclosure which outline the aspects, fields and feature of disclosure: The company has a policy of disclosure and transparency towards the shareholders, potential investors and other stakeholders approved by the board of directors. It complies with the provisions of the Capital Markets Authority Law, its executive regulations, the Authority’s instructions and best practices in this regard: The following are the company’s disclosures for 2018:
Letter Date Description Authority
2/1/2018 Disclosure of the treasury shares for the year ended on 31/12/2017 Capital MarketsAuthority
4/1/2018 Disclosure of the company’s shareholders whose ownership percentage in the company’s capital is 5% or more Kuwait Boursa
25/3/2018 Disclosure of the board of directors meeting on 27/3/2018 for discussing the financial statements of 2017 Kuwait Boursa
25/3/2018 Disclosure of increasing the ownership in affiliated companies Kuwait Boursa27/3/2018 Disclosure of the financial results for the year ended 31/12/2017 Kuwait Boursa
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Letter Date Description Authority
1/4/2018 Disclosure of treasury shares as on 31/3/2018 Capital MarketsAuthority
10/5/2018 Setting a date for the ordinary general assembly meeting of 2017 on 28/5/2018 Kuwait Boursa
13/5/2018 Disclosure of the board of directors meeting on 14/5/2018 for discussing the financial information for the first quarter of 2018 Kuwait Boursa
14/5/2018 Disclosure of the interim financial results for the first quarter ended on 31/3/2018 Kuwait Boursa
28/5/2018 Disclosure of the non-holding the ordinary general assembly on 28/5/2018 for the insufficient number of quorum Kuwait Boursa
29/5/2018 Setting a date for the (postponed) ordinary general assembly meeting of 2017 on 13/6/2018 Kuwait Boursa
13/6/2018 Holding of the (postponed) ordinary general assembly meeting of 2017 Kuwait Boursa
2/7/2018 Disclosure of the treasury shares for the year ended on30/6/2018 Capital MarketsAuthority
29/7/2018 Disclosure of a special nature deal with a number of 4,643,102 shares Kuwait Boursa
8/8/2018 Disclosure of the board of directors meeting on 12/8/2018 for discussing the financial information for the second quarter of 2018 Kuwait Boursa
12/8/2018 Disclosure of a special nature deal with a number of 6,798,829 shares Kuwait Boursa
12/8/2018 Disclosure of the interim financial results for the secondquarter ended on 30/6/2018 Kuwait Boursa
10/9/2018 List of the names of concerned persons: members of the board of directors, members of the executive body, concerned authorities and others
Capital MarketsAuthority
10/9/2018 Disclosure of a special nature deal with a number of 5,600,000 shares Kuwait Boursa
12/9/2018 Completion of sale procedures for a concerned person Kuwait Boursa
19/9/2018 List of the concerned persons (Legal Persons) Capital MarketsAuthority
20/9/2018 Disclosure of a special nature deal with a number of 9,286,205 shares Kuwait Boursa
20/9/2018 Disclosure of a special nature deal with a number of 9,700,768 shares Kuwait Boursa
3/10/2018 Disclosure of the treasury shares for the year ended on30/9/2018 Capital MarketsAuthority
25/10/2018 Disclosure of a special nature deal with a number of 9,369,112 shares Kuwait Boursa
7/11/2018 Disclosure of the board of directors meeting on 11/11/2018 for discussing the financial information for the third quarter of 2018 Kuwait Boursa
11/11/2018 Disclosure of the interim financial results for the first third quarter ended on 30/9/2018 Kuwait Boursa
27/11/2018 Concerned person’s dealing in shares Kuwait Boursa28/11/2018 Concerned person’s dealing in shares Kuwait Boursa29/11/2018 Concerned person’s dealing in shares Kuwait Boursa2/12/2018 Concerned person’s dealing in shares Kuwait Boursa4/12/2018 Concerned person’s dealing in shares Kuwait Boursa5/12/2018 Concerned person’s dealing in shares Kuwait Boursa6/12/2018 Concerned person’s dealing in shares Kuwait Boursa
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• A brief on the application of the disclosure requirement of the board members and executive management :
The company keeps a record of disclosures of the members of the board of directors and the executive management, containing the information and data required to be disclosed in accordance with the requirements of the laws, regulations, and policies of the company in this regard, and the aforesaid record shall be regularly updated, and it shall also be available to the interested parties for inspection during the normal working hours of the company.
• A brief statement on the application of the requirements of composing the Investor Affairs Organizational Unit:
The Investor Affairs Organizational Unit of the company has been established with the appropriate independence. It is responsible for providing the necessary information, data and reports to shareholders, potential investors and other stakeholders in a timely manner and through the applicable methods and means of disclosure, including the company’s website.
• A brief on how to develop IT infrastructure and fully relying on it for the disclosure processes:
The company is keen to rely on the information technology to communicate with shareholders, potential investors and other stakeholders by creating a special section on the company’s corporate governance website through which the information and data, important to them, are presented.
Eighth Rule
Respecting the Rights of Shareholders
• A brief on the application of the requirements for the identification and protection of the general rights of shareholders, in order to ensure equity and equality among all shareholders:
The company’s articles of association and its internal policies and procedures guarantee that all shareholders will exercise their rights to achieve justice and equality in a way that does not conflict with the laws, regulations, resolutions and instructions in force. The company is also keen to treat all shareholders equally and without any discrimination. Among the most prominent general rights of shareholders are the following: - Disposal of shares such as registration and entry of ownership, transfer and assignment of
ownership. - Receipt of the share of dividends. Receiving a share of the company’s assets in case of liquidation. - Obtaining timely information and data on the company’s activity. - Participate in meetings of the general assembly of shareholders and vote on its decisions. - Monitor the performance of the company in general. - Accountability of members of the board of directors and executive management in the event of
failure to perform the tasks entrusted to them.
• A summary on the establishment of a special register to be kept with the clearing agency, as a part of the requirements for continuous follow-up of shareholder data:
In accordance with the agreement signed between the company and Kuwait Clearing Company, the register of shareholders shall be kept at the Clearing House in which the information and particulars of the shareholders shall be recorded. The company shall keep a copy of this register and the information, and data contained therein shall be treated in accordance with the highest degree of
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protection and confidentiality. This record shall be available to the concerned parties for reviewing during the normal working hours of the company.
• A summary on how to encourage the shareholders to participate and vote in the general assembly meetings of the company:
The company encourages the shareholders to attend the meetings of the general assembly of the company, participate in it and vote on its decisions. The company will announce and disclose the invitation to the meeting of the general assembly including the agenda, time and venue of the meeting, within the prescribed dates and through the specified means and mechanisms. Moreover, the company provides shareholders, long before the general assembly, with sufficient time to obtain the information and data related to the agenda items. The company also allows the shareholders to delegate others to attend the general assembly meeting and to vote on its decisions by virtue of a special power of attorney or an authorization prepared by the company for this purpose. The company shall not charge any fees for the attendance of the shareholders in the meetings of the general assembly.
Ninth Rule
Recognizing the Role of Stakeholders
• A summary on the systems and policies which protect and recognize the rights of stakeholders:
The company’s board of directors has adopted a policy to protect the rights of stakeholders, including the rules and procedures that guarantee the protection and recognition of the rights of stakeholders and provide them with compensation in the event of any violation of their rights, in accordance with the applicable laws in the State of Kuwait, such as the Companies Law and Labour Law, in addition to the contract concluded between the company and the stakeholders and any additional undertakings made by the company towards them.
• A summary on how to encourage stakeholders to participate in following-up the company’s various activities:
The company is keen to benefit from the contributions of stakeholders and encourage them to participate in the follow-up activities in accordance with the realization of their interests, where the company provides the information, data and reports necessary to stakeholders in a timely manner and through the methods and means of disclosure, including the website of the company, and the investor affairs mentioned above. It also allows the stakeholders to report to the board any improper practices to which they are exposed by the company, while providing appropriated confidentiality and protection to parties in good faith on such practices.
Tenth Rule
Enhancing and improving the Performance
• A brief on the application of the requirements for the setting of mechanisms that will allow the members of the board of directors and executive management to receive ongoing training programs and courses:
An orientation program is provided to the new members of the board of directors and executive
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management about the company’s activities, which includes providing them with the company’s articles of association, strategy, organizational structure, annual report, financial statements, charters of work of the board and committees, adopted policies as well as any other information, data, reports or documents. Furthermore, a plan shall be prepared for the training programs suitable to the members of the board of directors and executive management regarding any arising new developments in the company’s relevant fields.
• A summaryon how to evaluate the overall performance of the board of directors and the performance of each member of the board of directors and the executive management:
An annual self-assessment is conducted on the board of directors as a whole, and the contribution of each member of the board, each of its committees and executive management according to a set of objective performance indicators approved by the board of directors. This evaluation is presented to the board for discussion and adoption of the required recommendations in this regard which finally aimed at strengthening the capabilities of the board, its members and executive management in all areas of the company’s work.
• A summary on the board’s efforts to create organizational values for its employees through achieving strategic objectives and improving performance rates:
The board of directors is keen to create the organizational values (Value Creation) among the employees in the company by achieving the strategic objectives and improving the performance rates an abide by the relevant laws, regulations, resolutions and instructions, which helps in motivating the employees to work continuously in order to maintain the financial integrity of the company.
Eleventh Rule
Focusing on the Importance of Social Responsibility
• A summary on establishing a policy that ensures the equilibrium between the objectives of the company, and the objectives of the community
The board of directors of the company adopted a social responsibility policy aimed at linking the objectives of the company to the objectives that the community seeks to achieve, taking into consideration the social and economic aspects of the community in terms of the job opportunities, project support, awareness programs, charitable initiatives health and environmental protection, etc.
• A brief on the programs and mechanisms used to assist in highlighting the company’s efforts in the field of social work:
The company has developed a series of programs that ensure the continuity of the implementation of the social responsibility policy. The company works to contribute to the social and economic activities on a continuous basis (charitable, cultural, education, health, environmental) through the adoption of an annual plan for all contributions and events through the year compared with other companies in the same sector, and the adoption of an annual provision by the board of directors and general assembly for the execution of this plan, supervising its implementation and disclosure of the same in the company’s annual report.
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Messrs. Shareholders, The respected,,After greetings,,
Sub. Transactions with related parties for financial year ended on 31st of December 2018
and expected to financial year ended on 31st of December 2019 report
The following is statement of transactions with related parties for financial year ended on 31st of December 2018 and expected to financial year ended on 31st of December 2019 report:
Statement Year 2018Expected
for year 2019
1- Balances included in financial position statement
- Dues from related parties 263,970 -- Investment with fair value through the
income statement 5,801 6,381
Total 269,771 6,381
2- Balances included in accumulated income statement
- Portfolio management fees 2,473 1,250
3- Benefits and salaries of top-management employees
- Salaries and other benefits 338,537 348,693
- End-service benefits 29,700 30,591
Total 368,237 379,284
The related parties are mainly represented in the members of board of directors, main management employees, subsidiaries, shareholders and companies in which the mother company is mainly owner or in which they practice essential impact and influence as all transactions are done with related parties according to approved conditions by group management.
Please accept with highly anticipation and appreciation,,
Talal Zaben Al-HazalChairman
Report on transactions with related parties
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Senergy Holding (K.S.C.P) and its subsidiaries(Previously Safat Energy Holding Company K.S.C.P and its subsidiaries)
State of Kuwait
Consolidated financial statements and independent auditors’ report For the year ended 31 December 2018
PageContents
36 - 40Independent auditors’ report
41Consolidated statement of financial position
42Consolidated statement of income
43Consolidated statement of comprehensive income
44Consolidated statement of changes in equity
45Consolidated statement of cash flows
46 - 84Notes to the consolidated financial statements
Index
Financial Statements
Senergy Holding K.S.C.P
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Financial Statements
Independent Auditors’ Report
To the Shareholders of
Senergy Holding Company K.P.S.C.
State of Kuwait
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Senergy Holding Company K.P.S.C. (“the Parent Company”) and its subsidiaries, (together referred to as “the Group”) which comprise the consolidated statement of financial position as at 31 December 2018, and the consolidated statement of income, consolidated statement of other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements including summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2018, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis of Opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibility under these standards are clarified within item of auditor’s responsibilities for the audit of the consolidated financial statements mentioned in our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) together with ethical requirements that are relevant to our audit of the consolidated financial statements in the State of Kuwait, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Al Shaheed Tower, 6th FloorKhaled Ben Al Waleed Street, SharqP.O. Box 25578, Safat 13116KuwaitTel.: +965 2242 6999Fax: +965 2240 1666www.bdo.com.kw
AL-SOOR Certified Public AccountantsQibla - Block 13 - AI-Soor StreetAI-Hilaliya bldg.- 5th FloorP.O.Box: 6910- Salmiya 22080 Kuwait Tel.: (+965) 2246 5816 Fax: (+965) 2246 5817www.alsoorcpa.comwww.ggi.com
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Financial Statements
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on these matters. Below are the details of the key audit matters identified by us and how we dealt with each matter in the scope of our audit thereto.
a) Impairment of trade receivables and other debit balances
As of December 31, 2018 the carrying amount of trade receivables and other debit balances amounted to KD 3,643,716 (2017: KD 5,787,719). The determination of impairment in trade receivables requires management to make the appropriate judgment on the estimation of the amounts and timing of future cash flows and the capability of customers to repay, it also requires management to make assumptions about multiple factors including different degrees of judgment and uncertainty. The Group has significant trade receivables with institutions and entities. However, the risk of default of certain customers to repay remains significant. For these reasons and the importance of this item in relation to the Group’s consolidated statement of financial position, we consider this as a key audit matter. The accounting policies adopted for trade receivables are disclosed in Note (3.8) to the consolidated financial statements.
b) Impairment of goodwill
The Group has goodwill at book value of KD 6,820,396 as at 31 December 2018 (2017: KD 6,820,396). The Group’s management contracted with an external consultant to determine the fair value that is recoverable from the cash generating units related to goodwill. Calculation of the recoverable value is subjective because it includes estimates, judgements and valuation of several other variables (expected cash flows, economic growth rate and discount rate, etc...). Due to such complexity, we considered this matter as a key audit matter. The Group disclosed the goodwill in Notes 3.3 & 7.
We valuated reasonableness of the input variable provided by the management, including future estimates. We considered independence and efficiency of the external valuer, using our valuation experts to assist us to valuate the estimates and assumptions of the external valuer, and valuate appropriateness of the disclosures related to the goodwill.
Other Information
Management is responsible for the other information. The other information comprises the (information included in the annual report, but does not include the consolidated financial statements and our auditors’ report thereon). It is expected that the annual report will be available to us after date of this audit report.
Our opinion on the consolidated financial statements does not cover the other information attached to it, and we do not express any form of assurance conclusion thereon.
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Financial Statements
In connection with our audit of the consolidated financial statements, our responsibility is to read
the other information mentioned above and consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information; we are required to report that fact in
our report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRSs, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an audit report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
39
Annual Report
2018
Financial Statements
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting.
Based on the audit evidence obtained, we will determine whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to continue as
a going concern. If we conclude that a material uncertainty exists, we will draw attention in the audit
report to the related disclosures in the consolidated financial statements or if such disclosures are
inadequate, to modify our opinion. Our conclusions will be based on the audit evidence obtained
up to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the Group or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the Group’s audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the consolidated financial statements of the current
year and are therefore the key audit matters. We describe these matters in our auditors’ report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Senergy Holding K.S.C.P
40
Annual Report
2018
Financial Statements
Report on Other Legal and Regulatory Requirements
In our opinion, proper books of account have been kept by the Parent Company and the consolidated
financial statements, together with the contents of the report of the Parent Company’s Board of
Directors relating to these consolidated financial statements, are in accordance therewith. We
further report that we obtained all the information and explanations that we required for the
purpose of our audit and that the consolidated financial statements incorporate all information that
is required by the Companies’ Law No. 1 of 2016, its Executive Regulations, as amended, and by the
Parent Company’s Memorandum of Incorporation and Articles of Association, as amended, that an
inventory was duly carried out and that, to the best of our knowledge and belief, no violations of
the Companies’ Law No. 1 of 2016, and its Executive Regulations, as amended, nor of the Parent
Company’s Memorandum of Incorporation and Articles of Association, as amended, have occurred
during the financial year ended 31 December 2018 that might have had a material effect on the
business of the Parent Company or its consolidated financial position.
Khaled Hasan Al-Ahmad - CPAFaisal Saqer Al Saqer
License No. 173 «A»License No. 172 “A”
AL SOOR Certified Public AccountantsBDO Al Nisf & Partners
Independent member of GGI - Switzerland
Kuwait:
41
Annual Report
2018
Financial Statements
Consolidated statement of financial position As at 31 December 2018
2018 2017
Notes KD KDAssetsNon-current assetsProperty, plant and equipment 5 3,149,579 3,567,724Investment property 6 1,766,276 1,831,583Goodwill 7 6,820,396 6,820,396Available for sale investments 8 - 323,985Financial assets at fair value through other comprehensive income 9 81,193 -Term deposits 5,195 6,530Total non-current assets 11,822,639 12,550,218
Current assetsInventories 10 330,712 456,196Trade receivables and other debit balances 11 3,643,716 5,787,719Due from related parties 12 263,970 262,627Wakala receivables 13 1,703,404 453,404Financial assets at fair value through profit or loss 14 5,801 6,674Cash and bank balances 15 2,299,459 3,378,367Total current assets 8,247,062 10,344,987Total assets 20,069,701 22,895,205
Equity and liabilities EquityShare capital 16 20,000,000 20,000,000Share premium 17 181,866 181,866Treasury shares 18 (181,866) (181,866)Treasury shares reserve 27,456 27,456Fair value reserve - (16,481)Fair value reserve from financial assets at fair value through other comprehensive income (40,629) -Foreign currency translation reserve (143,886) 117,207Accumulated losses (5,074,509) (5,320,769)Equity attributable to the shareholders of the Parent Company 14,768,432 14,807,413Non-controlling interests 19 2,316,533 4,052,792Total equity 17,084,965 18,860,205
LiabilitiesNon-current liabilitiesProvision for employees’ end of service indemnity 625,406 762,643Total non-current liabilities 625,406 762,643
Current liabilitiesTrade payables and other credit balances 20 2,359,330 3,272,357Total current liabilities 2,359,330 3,272,357Total liabilities 2,984,736 4,035,000Total equity and liabilities 20,069,701 22,895,205
The accompanying notes on pages 46 to 84 form an integral part of these consolidated financial statements.
Talal Z M AlhathalChairman
Nasser Bader Al SharhanVice Chairman and CEO
Senergy Holding K.S.C.P
42
Annual Report
2018
Financial Statements
2018 2017
Notes KD KD
Operating revenues 2,913,747 3,157,425
Operating costs (2,507,384) (3,003,784)
Gross profit 406,363 153,641
General and administrative expenses 21 (1,296,794) (1,662,801)
Depreciation and amortization (6,5) (89,521) (99,619)
Reversal of provision of doubtful debts 11 31,045 -
Provision for doubtful debts 11 (114,033) (202,737)
Operating loss (1,062,940) (1,811,516)
Gain on sale of property, plant and equipment 5 - 759,428
Impairment losses on available for sale investments 8 - (162,763)
Rental income 321,571 331,443
Commission income 189,113 111,620
Islamic deposits income 9,522 1,541
Losses from foreign currency differences (16,921) (54,793)
Impairment on property, plant and equipment written back 11 - 1,130,220
Provision for employees’ end of service indemnity written back 43,648 5,026
Tax provision on foreign subsidiaries 22 (105,028) (59,761)
Net other income / (expenses) 53,033 (94,481)
Net (loss) / profit for the year before National Labour Support Tax (NLST) (568,002) 155,964
National Labour Support Tax - (4,400)
Net (loss) / profit for the year (568,002) 151,564
Attributable to:
Shareholders of the Parent Company (534,690) 71,870
Non-controlling interests 19 (33,312) 79,694
(568,002) 151,564
Basic and diluted (loss) / earnings per share attributable to the shareholders of the Parent Company (fils) 23 (2.68) 0.36
The accompanying notes on pages 46 to 84 form an integral part of these consolidated financial statements.
Consolidated statement of Income for the year ended 31 December 2018
43
Annual Report
2018
Financial Statements
2018 2017
Notes KD KD
Net (loss) / profit for the year (568,002) 151,564
Other comprehensive loss
Items that may be reclassified subsequently to the consolidated statement of income:
Change in fair value of available for sale investments - (153,014)
Transferred to statement of income as a result of impairment 8 - 162,763
Exchange differences on translation of foreign operations (391,762) (47,783)
Items that may not be reclassified subsequently to the consolidated statement of income:
Loss on fair value of financial assets at fair value through comprehensive income 9 (25,775) -
Other comprehensive loss (417,537) (38,034)
Total comprehensive (loss) / income for the year (985,539) 113,530
Attributable to:
Shareholders of the Parent Company (819,931) 46,830
Non-controlling interests (165,608) 66,700
(985,539) 113,530
The accompanying notes on pages 46 to 84 form an integral part of these consolidated financial statements.
Consolidated statement of comprehensive incomeFor the year ended 31 December 2018
Senergy Holding K.S.C.P
44
Annual Report
2018
Financial Statements
Shar
e c
apit
alSh
are
prem
ium
Trea
sury
sh
ares
Trea
sury
sh
ares
re
serv
eFa
ir v
alue
re
serv
e
Fair
val
ue
rese
rve
from
fin
anci
al a
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s at
fair
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ue
thro
ugh
othe
r co
mpr
ehen
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in
com
e
Fore
ign
curr
ency
tr
ansl
atio
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serv
eA
ccum
ulat
ed
loss
es
Equi
ty
attr
ibut
able
to
the
shar
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ders
of
the
Pare
nt
Com
pany
Non
-co
ntro
lling
in
tere
sts
Tota
l eq
uity
KDKD
KDKD
KDKD
KDKD
KDKD
KD
Bala
nce
at 1
Janu
ary
2017
20,0
00,0
0018
1,86
6(1
81,8
66)
27,4
56(2
6,23
0)-
823,
685
(5,3
92,6
39)
15,4
32,2
727,
007,
698
22,4
39,9
70
Profi
t for
the
year
--
--
--
-71
,870
71,8
7079
,694
151,
564
Oth
er c
ompr
ehen
sive
inco
me
for t
he y
ear
--
--
9,74
9-
(34,
789)
-(2
5,04
0)(1
2,99
4)(3
8,03
4)
Tot
al o
ther
com
preh
ensi
vein
com
e / (
loss
) for
the
year
--
--
9,74
9-
(34,
789)
71,8
7046
,830
66,7
0011
3,53
0
Effe
ct o
n sa
le o
f inv
estm
ents
in a
sub
sidi
ary
--
--
--
(671
,689
)-
(671
,689
)(3
,021
,606
)(3
,693
,295
)
Bala
nce
at 3
1 D
ecem
ber
2017
(As
prev
ious
ly re
port
ed)
20,0
00,0
0018
1,86
6(1
81,8
66)
27,4
56(1
6,48
1)-
117,
207
(5,3
20,7
69)
14,8
07,4
134,
052,
792
18,8
60,2
05
Impa
ct o
f ado
ptio
n of
IFRS
9-
--
-16
,481
(16,
481)
--
--
-
Bala
nce
at 1
Janu
ary
2018
20,0
00,0
0018
1,86
6(1
81,8
66)
27,4
56-
(16,
481)
117,
207
(5,3
20,7
69)
14,8
07,4
134,
052,
792
18,8
60,2
05
Loss
for t
he y
ear
--
--
--
(534
,690
)(5
34,6
90)
(33,
312)
(568
,002
)
Oth
er c
ompr
ehen
sive
loss
for
the
year
--
--
-(2
4,14
8)(2
61,0
93)
-(2
85,2
41)
(132
,296
)(4
17,5
37)
Tot
al o
ther
com
preh
ensi
velo
ss fo
r the
yea
r-
(24,
148)
(261
,093
)(5
34,6
90)
(819
,931
)(1
65,6
08)
(985
,539
)
Acq
uisi
tion
of n
on-c
ontr
ollin
gin
tere
sts
(not
e 3.
2)-
--
--
-78
0,95
078
0,95
0(1
,570
,651
)(7
89,7
01)
Bal
ance
at 3
1 D
ecem
ber
2018
20,0
00,0
0018
1,86
6(1
81,8
66)
27,4
56-
(40,
629)
(143
,886
)(5
,074
,509
)14
,768
,432
2,31
6,53
317
,048
,965
The
acco
mpa
nyin
g no
tes
on p
ages
46
to 8
4 fo
rm a
n in
tegr
al p
art o
f the
se c
onso
lidat
ed fi
nanc
ial s
tate
men
ts.
Con
solid
ated
sta
tem
ent o
f cha
nges
in e
quit
y F
or th
e ye
ar e
nded
31
Dec
embe
r 201
8
45
Annual Report
2018
Financial Statements
2018 2017
Notes KD KDOperating activitiesNet (loss) / profit for the year (568,002) 151,564Adjustments for:Depreciation and amortization 5 & 6 826,150 929,518Gain on sale of property, plant and equipment 5 - (759,428)Reversal of provision for doubtful debts 11 (31,045) -Provision for doubtful debts 11 114,033 202,737Impairment of available for sale investments 8 - 162,763Islamic deposits income (9,522) (1,541)Provision for employees’ end of service indemnity 138,228 163,422Provision for employees’ end of service indemnity written back (46,889) (5,026)Impairment on property, plant and equipment written back 10 - (1,130,220)Tax provision for foreign subsidiaries 22 105,028 59,761
527,981 (226,450)Changes in operating assets and liabilities:Inventories 125,484 (137,893)Trade receivables and other debit balances 2,051,018 (708,071)Due from related parties (1,343) 1,560,224Net change in financial assets at fair value through statement of income 873 -Trade payables and other credit balances (1,281,228) (357,536)Cash generated from operating activities 1,422,785 130,274Tax paid (95,031) (74,802)Employees› end of service indemnity paid (110,154) (57,815)Net cash from / (used in) operating activities 1,217,600 (2,343)
Investing activitiesPaid for the purchase of property, plant and equipment 5 (484,681) (930,710)Proceeds from sale of property, plant and equipment - 932,524Proceeds from disposal of financial assets at fair value through other comprehensive income 9 217,017 -Proceeds from disposal of subsidiary - 3,065,000Net change in wakala receivables (1,250,000) (311,113)Purchase of non-controlling interests 3.2 (789,701) -Net change in term deposits 1,335 (375)Islamic deposits income received 9,522 1,541Net cash (used in) / from investing activities (2,296,508) 2,756,867
Net (decrease) / increase in bank balances and cash (1,078,908) 2,754,524Bank balances and cash at the beginning of the year 3,378,367 623,843Bank balances and cash at the end of the year 15 2,299,459 3,378,367
The accompanying notes on pages 46 to 84 form an integral part of these consolidated financial statements.
Consolidated statement of cash flowsFor the year ended 31 December 2018
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Senergy Holding K.S.C.P Financial Statements
46
Annual Report
2018
1. Incorporation and activities
Senergy Holding Company K.P.S.C. (“the Parent Company”) was incorporated on 22 March 1983 in accordance with the Companies’ Law in the State of Kuwait. In the Extraordinary General Assembly Meeting held on 7 April 2016, the shareholders approved the change of the Company’s name from Safat Energy Holding Company K.P.S.C. to Senergy Holding Company K.P.S.C. The Parent Company’s shares are listed on Kuwait Stock Exchange.
In accordance with the extraordinary general assembly meeting held on 15 May 2007, the Parent Company conducts its activities in accordance with the Islamic Shari`a.The principal activities as defined in the Parent Company’s Memorandum of Incorporation are as follows:- Owning shares of Kuwaiti or foreign shareholding and limited liabilities Companies as well
as participating in the formation, management, financing, and providing to third parties guarantees for these Companies.
- Financing, guarantee Companies on behalf of third parties in which the percentage of the of such Companies may not be less than 20%.
- Owning industrial rights for patents, trade names, and designs and leasing the same to other Companies for their use inside or outside Kuwait.
- Owning movable and real estate that are necessary to practice its operation in accordance to the law.
- Utilizing the financial surpluses of the Parent Company by investing them in portfolios managed by specialized Companies.
The Group’s consolidated financial statements comprise the Parent Company and its subsidiaries (together referred to as “the Group”) (Note 3.2).
The address of the Parent Company’s registered office is Hawalli - Beirut Street, Al-Safat Group Headquarters, 7th floor, P.O. Box 27728 Safat, 13138, State of Kuwait.
The consolidated financial statements were authorized for issue by the Parent Company’s Board of Directors on 25/3/2019. The shareholders of the Parent Company shall have the power to amend these consolidated financial statements at the Annual General Assembly.
2. Application of new and revised International Financial Reporting Standards (IFRSs)
a) New standards and amendments effective from 1 January 2018
The accounting policies applied by the Company are consistent with those used in the previous year except for the changes due to implementation of the following new and amended International Financial Reporting Standards:
IFRS 9 - Financial Instruments
The Group has adopted IFRS 9 Financial Instruments effective from 1 January 2018. The Group has not restated comparative information for 2017 as permitted by the transitional provisions of the standard. Therefore, the information presented for 2017 does not reflect the requirements of
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Financial Statements
47
Annual Report
2018
IFRS 9 and is not comparable to the information presented for 2018. Differences in the carrying amount of financial assets resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as at 1 January 2018.
The key changes to the Group’s accounting policies resulting from the adoption of IFRS 9 are summarized below:
Classification and Measurement of Financial assets
The Group classifies its financial assets upon initial recognition into the following categories:
- Financial assets carried at amortised cost
- Financial assets carried at fair value through other comprehensive income (FVOCI)
- Financial assets carried at fair value through profit or loss (FVPL)
Financial assets carried at amortised cost:
A financial asset is carried at amortised cost if it meets both of the following conditions: - It is held within a business model whose objective is to hold assets to collect contractual cash
flows ; and - its contractual terms give rise, on specified dates, to cash flows that are solely payments of
principal and yield income on the principal amount outstanding
Financial assets carried at amortised cost are subsequently measured at amortised cost using the effective yield method. Yield income, foreign exchange gains and losses and impairment are recognised in the consolidated statement of profit or loss. Any gain or loss on derecognition is recognised in the consolidated statement of profit or loss.
Financial assets carried at fair value through other comprehensive income (FVOCI):
Equity investments at FVOCI
Upon initial recognition, the Group makes an irrevocable election to classify some of its equity investments as equity investments at FVOCI if they meet the definition of Equity under IAS 32 Financial Instruments: Presentation and are not held for trading. Such classification is determined on an instrument by instrument basis.
Equity investments at FVOCI are subsequently measured at fair value. Changes in fair values including foreign exchange component are recognised in other comprehensive income and presented in the fair values reserves as part of equity. Cumulative gains and losses previously recognised in other comprehensive income are transferred to retained earnings on derecognition and are not recognised in the consolidated statement of profit or loss. Dividend income on equity investments at FVOCI are recognised in the consolidated statement of profit or loss unless they clearly represent a recovery of part of the cost of the investment in which case they are recognised in other comprehensive income. Equity investments at FVOCI are not subject to impairment assessment.
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Senergy Holding K.S.C.P Financial Statements
48
Annual Report
2018
Financial assets carried at fair value through profit or loss
Financial assets in this category are those assets which have been either designated by management upon initial recognition or are mandatorily required to be measured at fair value under IFRS 9. Management designates an instrument at FVPL that otherwise meet the requirements to be measured at amortised cost or at FVOCI only if it eliminates, or significantly reduces, an accounting mismatch that would otherwise arise. Financial assets with contractual cash flows not representing solely payment of principal and yield income are mandatorily required to be measured at FVTPL periodically.
Financial assets at FVTPL are subsequently measured at fair value. Changes in fair value are recognised in the consolidated statement of profit or loss. Dividend income from equity investments measured at FVTPL is recognised in the consolidated statement of profit or loss when the right to the payment has been established.
Business model assessment
The Group determines its business model at the level that best reflects how it manages groups of financial assets to achieve its business objective. The Group’s business model is not assessed on an instrument-by-instrument basis but at a higher level of aggregated portfolios and is based on a number of observable factors. The information considered includes: - The stated policies and objectives for the portfolio and the operation of those policies in
practice- The risks that affect the performance of the business model (and the financial assets held
within that business model) and how those risks are managed; and - The frequency, volume and timing of sales in prior periods, the reasons for such sales and its
expectations about future sales activity.
Business model assessment
The business model assessment is based on reasonably expected scenarios without taking ‘worst case’ or ‘stress case’ scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Group’s original expectations, the Group does not change the classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly originated or newly purchased financial assets going forward.
Assessment of whether contractual cash flows are solely payments of principal and yield income (SPPI test)
The Group assesses the contractual terms of financial assets to identify whether they meet the SPPI test. ‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset. Yield income is defined as consideration for time value of money and for the credit risk associated with the principal and for other basic risks and costs as well as a profit margin. In assessing whether the contractual cash flows are solely payments of principal and yield income, the Group considers whether the financial asset contains a contractual term that could change the timing or amount of
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Financial Statements
49
Annual Report
2018
contractual cash flows such that it would not meet this condition. The Group considers: - Contingent events that would change the amount and timing of cash flows;- Leverage features; - Prepayment and extension terms; - Terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse asset
arrangements); and - Features that modify consideration of the time value of money – e.g. periodical reset of going
rates.
Contractual terms that introduce a more than minimum exposure to risks or volatility in the contractual cash flows that are unrelated to a basic arrangement do not give rise to contractual cash flows that are solely payment of principal and yield income. In such cases, the financial asset is measured at fair value through profit or loss.
Reclassification of financial assets
The Group does not reclassify its financial assets subsequent to their initial recognition except, in the exceptional circumstances, when the Group acquires, disposes of, or terminates a business line.
Impairment of financial assets
The Group applies a three stage approach to measure the Expected Credit Loss (ECL) as follows:
Stage 1 : 12-months ECL
The Group measures loss allowances at an amount equal to 12-months ECL on financial assets where there has not been significant increase in credit risk since their initial recognition or on exposures that are determined to have a low credit risk at the reporting date. The Group considers a financial asset to have low credit risk when their credit risk rating is equivalent to the globally understood definition of ‘investment grade’.
Stage 2 : Lifetime ECL – not credit impaired
The Group measures loss allowances at an amount equal to lifetime ECL on financial assets where there has been a significant increase in credit risk since initial recognition but are not credit impaired.
Stage 3 : Lifetime ECL – credit impaired
The Group measures loss allowances at an amount equal to lifetime ECL on financial assets that are determined to be credit impaired based on objective evidence of impairment.
Life time expected credit losses are ECLs that result from all possible default events over the expected life of a financial instrument. The 12 months ECL is the portion of life time expected credit loss that result from default events that are possible within the 12 months after the reporting date. Both life time expected credit losses and 12 month ECLs are calculated on either an individual basis or a collective basis depending on the nature of the underlying portfolio of financial instruments.
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Senergy Holding K.S.C.P Financial Statements
50
Annual Report
2018
Impa
ct o
f IFR
S 9
adop
tion
The
follo
win
g ta
ble
show
s th
e or
igin
al c
lass
ifica
tion
and
mea
sure
men
t cat
egor
ies
in a
ccor
danc
e w
ith IA
S 39
and
the
new
cla
ssifi
catio
n an
d m
easu
rem
ent c
ateg
orie
s un
der I
FRS
9 fo
r the
Gro
up’s
finan
cial
ass
ets
as a
t 1 Ja
nuar
y 20
18
The
prev
ious
cl
assi
ficat
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in
acco
rdan
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ith
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ew c
lass
ifica
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ith
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9
The
prev
ious
ca
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ng v
alue
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rdan
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ith
IAS
39Re
mea
sure
men
t (E
CLs)
Recl
assi
ficat
ion
of th
e ne
w
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ying
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ue
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ccor
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e w
ith
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New
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ount
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9
KDKD
KDKD
Fina
ncia
l ass
ets
Avai
labl
e fo
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e in
vest
men
tsAv
aila
ble
for s
ale
inve
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Fina
ncia
l ass
ets
at fa
ir va
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rese
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thro
ugh
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r co
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me
323,
985
-(3
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-
Fina
ncia
l ass
ets
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ir va
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thro
ugh
othe
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inco
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l ass
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mpr
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7
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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IFRS 15 - Revenue from contracts with customers
The Group has adopted IFRS 15 Revenue from Contracts with Customers effective from 1 January 2018. This standard supersedes IAS 11 Construction Contracts and IAS 18 Revenue along with related IFRIC 13, IFRIC 15, IFRIC 18 and SIC 31. This standard removes inconsistencies and weaknesses in previous revenue recognition requirements, provides a more robust framework for addressing revenue issues and improves comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The core principle of IFRS 15 is that the entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange of those goods and services. Under IFRS 15, an entity recognizes revenue when or as the performance obligation is satisfied.
These amendments became effective on 1 January 2018 and they had no impact on the Group’s consolidated financial statements.
Amendments to IFRS 2 - Classification and Measurement of Share-based Payment Transactions
This standard will be effective for annual periods beginning on or after 1 January 2018, the amendments address three main areas:
- The effects of vesting conditions on the measurement of a cash-settled share-based payment transaction
- The classification of a share-based payment transaction with net settlement features for withholding tax obligations
- The accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled.
These amendments did not have material impact to the Group’s consolidated financial statements.
Amendments to IAS 40 – Transfers of Investment Property
The amendments are effective for annual periods beginning on or after 1 January 2018 with earlier application permitted. The amendments clarify that a transfer to, or from, investment property necessitates an assessment of whether a property meets, or has ceased to meet, the definition of investment property, supported by observable evidence that a change in use has occurred. The amendments further clarify that situations other than the ones listed in IAS 40 may evidence a change in use, and that a change in use is possible for properties under construction (i.e. a change in use is not limited to completed properties).
These amendments did not have material impact to the Group’s consolidated financial statements.
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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Annual Improvements to IFRS – 2014 – 2016 Cycle
These annual improvements are effective for annual periods beginning on or after 1 January 2018 and they did not have a material impact on the Group’s consolidated financial statements. They include:
IFRS 1 – First-time Adoption of International Financial Reporting Standards
The amendments delete certain short-term exemptions in IFRS 1 because the reporting period to which the exemptions applied have already passed. As such, these exemptions are no longer applicable.
IAS 28 – Investments in Associates and Joint Ventures
The amendments clarify that the option for a venture capital organization and other similar entities to measure investments in associates and joint ventures at Fair Value Through Profit or Loss (FVTPL) is available separately for each associate or joint venture, and that election should be made at initial recognition of the associate or joint venture.
In respect of the option for an entity that is not an Investment Entity (IE) to retain the fair value measurement applied by its associates and joint ventures that are IEs when applying the equity method, the amendments make a similar clarification that this choice is available for each IE associate or IE joint venture.
IFRIC 22 – Foreign Currency Transactions and Advance Consideration
The Interpretation is effective for annual periods beginning on or after 1 January 2018 with earlier application permitted. Entities can apply the Interpretation either retrospectively or prospectively. Specific transition provisions apply to prospective application.
IFRIC 22 addresses how to determine the ‘date of transaction’ for the purpose of determining the exchange of rate to use on initial recognition of an asset, expense or income, when consideration for that item has been paid or received in advance in a foreign currency which resulted in the recognition of a non-monetary liability (for example, a non-refundable deposit or deferred revenue).
The Interpretation specifies that the date of transaction is the date on which the entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the Interpretation requires an entity to determine the date of transaction for each payment or receipt of advance consideration.
b) Standards and interpretations issued but not effective
The following new and amended IASB Standards have been issued but are not yet effective, and have not been adopted by the Group:
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IFRS 16 - Leases
This standard will be effective for annual periods beginning on or after 1 January 2019. This standard will be replacing IAS 17 “Leases” and will require lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under IAS 17 with limited exceptions for low-value assets and short term leases. At the commencement date of a lease, a lessee will recognize a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term.
These amendments are not expected to have material impact to the Group’s consolidated financial statements.
3. Significant accounting policies
3.1 Basis of preparation
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards issued by the International Accounting Standards Board (“IASB”) and IFRIC interpretations as issued by the International Financial Reporting Interpretations Committee (IFRIC) under the historical cost convention, except for certain financial instruments measured at fair value as explained in the accounting policies below.
The preparation of consolidated financial statements in compliance with adopted IFRS requires use of certain accounting estimates of the Group. The areas where significant accounting judgments and estimates have been made in preparing the consolidated financial statements and their effect are disclosed in Note (4).
3.2 Basis of consolidation
The consolidated financial statements comprise the financial statements of the Parent Company and its subsidiaries drawn up to 31 December 2018. The date of the financial statements of all subsidiaries is 31 December.
Where the Parent Company has control over an investee, it is classified as a subsidiary. The Parent Company controls an investee if all of three of the following elements are present:
- power over the investee;
- exposure to variable returns from the investee; and
- the ability of the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the Parent Company has the ability to direct the relevant operations of the investee without holding the majority of the voting rights. In
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determining whether de-facto control exists the Parent Company considers all relevant facts and circumstances, including:
- The size of the Parent Company’s voting rights relative to both the size and dispersion of other parties who hold voting rights.
- Substantive potential voting rights held by the Parent Company and by other parties.
- Other contractual arrangements
- Historic patterns in voting attendance.
The financial statements of subsidiary are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. The financial statements of the subsidiary are consolidated on a line-by-line basis by adding together like items of assets, liabilities, income and expenses. Intercompany balances and transactions, including intercompany profits or losses and unrealized profits and losses are eliminated in full on consolidation. Amounts reported in the financial statements of subsidiary have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Non-controlling interests in the net assets of consolidated subsidiary are identified separately from the Group’s equity therein. Non-controlling interests consist of amount of those interests at the date of original business combination and the non-controlling entity’s share of changes in equity since the date of the combination. Losses within a subsidiary are attributed to the non-controlling interests even if that results in a deficit balance.
Changes in the Group’s ownership interests in subsidiary that do not result in the Group losing control over the subsidiary are accounted for as equity transactions. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Profits or losses on disposals of non-controlling interests are also recorded in equity.
When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in the consolidated statement of income.
The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities (i.e. reclassified to the statement of income or transferred directly to retained earnings as specified by applicable IFRSs).
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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The subsidiaries of the Parent Company which have been consolidated in these financial statements together with the holdings at 31 December are set out below;
Name of subsidiaries Country of incorporation
Percentage of holding (%)
Principal activity
Direct ownership: 2018 2017
Senergy Services Company K.S.C. (Closed) and its subsidiaries *
State of Kuwait 94.57 91.05 Supporting activities to oil wells drilling and related maintenance
Eastern Industrial & Oilfield Services Holding Company B.S.C. (Closed) and its subsidiaries
Bahrain 100 100 Holding industrial property rights and investing in financial instruments
Indirect ownership:
Eastern National Oilfield Services Company K.S.C. (Closed) and its subsidiaries * State of Kuwait 86.71 67.71
Supporting activities to oil wells drilling and related maintenance
Eastern International Testing Services Company W.L.L. and its subsidiaries State of Kuwait 70 70
Maintenance of oil facilities, wells and refineries
Middle East Process Automation W.L.L. Bahrain 85 85
Import and supply of electronic equipment and repairs
Cornerstone W.L.L. Bahrain 65 65Import and Export of building materials.
EIOS Consultancy W.L.L. Bahrain 100 100
Facility management services and business consultants
* During the year, the Group purchased additional shares from Senergy Services Company K.S.C. (Closed) and Eastern National Oilfield Services Co. K.S.C. (Closed) with a total amount of KD 789,701. As a result of this transaction, the Group’s share in both companies increased from 91.05% to 94.57% and from 67.71% to 86.71% respectively. Profits of KD 780,950 were recorded directly in the consolidated statement of changes in equity.
3.3 Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of assets transferred by the Group, liabilities incurred or assumed by the Group to the former owners of the acquiree and equity
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instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognized as incurred.
At the acquisition date, the identifiable assets acquired and liabilities assumed and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘Measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not measured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is re-measured at subsequent reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in the consolidated statement of income. Goodwill is measured as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in the consolidated statement of income as a bargain purchase gain.
If the initial accounting for business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.
When a business combination is achieved in stages, the Group’s previously held equity interest
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in the acquirer’s is re-measured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in consolidated statement of income. Amounts arising from interests in the acquirer’s prior to the acquisition date that have previously been recognised in consolidated statement of other comprehensive income are reclassified to consolidated statement of income where such treatment would be appropriate if that interest were disposed of.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired.
If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the consolidated statement of income. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
3.4 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated loss due to impairment. Cost includes expenditure that is directly attributable to the acquisition of the asset.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the consolidated statement of income during the financial period in which they are incurred.
The estimated useful lives, residual values and depreciation method are reviewed at each financial position date, with the effect of any changes in the estimate accounted for on a prospective basis.
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An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the consolidated statement of income.
3.5 Investment properties
Investment properties are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided on investment property, other than freehold land at rates calculated to write off the cost of assets on a straight-line basis over their expected useful life.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated statement of income in the period in which the properties are derecognised.
3.6 Impairment of tangible assets
The Group reviews the carrying amounts of its tangible assets annually to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of the fair value less costs to sell or value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised immediately in the consolidated statement of income.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. Reversal of impairment losses are recognised immediately in the consolidated statement of income.
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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3.7 Inventories
Inventories are stated at the lower of cost or net selling value, less provision for any obsolete and slow moving items. The cost includes purchase price, import fees, transport, stevedoring and all other direct expenses required to bring inventory into its current location and condition. Cost is calculated based on weighted average cost rate method.
Net selling value represents the estimated selling price less all the estimated costs of completion and costs necessary to make the sale.
3.8 Financial instruments
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of such instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets or financial liabilities (other than financial assets and financial liabilities at fair value through statement of income) are added to or deducted from the fair value of the financial assets or financial liabilities at initial recognition. Transaction costs directly attributable to the acquisition immediately in the consolidated statement of income.
Financial assets
Financial assets are classified into the following specified categories: “available for sale investments”, “term deposits”, “trade receivables and other debit balances”, “due from related parties”, “wakala receivables”, “investments at fair value through statement of income” and “bank balances and cash”. The Group determines the proper classification for its financial assets at initial recognition date based on the purpose of acquiring such financial assets. All purchases or sales of financial assets are recognised on a trade date basis. The Group determines the classification of its financial assets as follows:
Available for sale investments
Available for sale financial assets are those acquired to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates or equity prices. Available for sale financial assets are initially recorded at fair value of the consideration given plus transaction costs. After initial recognition, available for sale investments are remeasured at fair value and resulting unrealized gains and losses are reported as a separate component of equity until the investment is sold or otherwise disposed of, or the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the consolidated statement of income for the period.
Trade receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method, less any impairment.
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Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Appropriate allowances for irrecoverable amounts are recognised in the consolidated statement of income when there is objective evidence the asset is impaired.
Effective interest rate method
The effective interest rate is a method of calculating the amortized cost of a financial asset and of allocating interest over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial asset, or, when appropriate, a shorter period.
Wakala receivables
Wakala receivables represent financial assets originated by the Group and invested with third parties for onward deals by those parties in various Islamic financial products, and are carried at amortised cost.
Impairment
Financial assets are assessed for indicators of impairment at each financial position date, other than those at fair value through statement of income. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the investment, the estimated future cash flows of the financial asset have been impacted.
For unquoted shares classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.
For trade receivables, objective evidence of impairment could include: (i) significant financial difficulty of the issuer or counterparty; or (ii) default or delinquency in interest or principal payments; or (iii) it becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial asset, such as trade receivable, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows,
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discounted at the financial asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the consolidated statement of income.
With the exception of available for sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the consolidated statement of income to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have had the impairment not been recognised.
Impairment losses recognised in the consolidated statement of income on available for sale equity instruments are not reversed through the consolidated statement of income. Any increase in fair value subsequent to an impairment loss is recognized directly in equity.
Investments at fair value through statement of income
Financial assets are classified as investments at FVTSI where the financial asset is either held for trading or it is designated as at FVTSI.
A financial asset is classified as held for trading if: (i) it has been acquired principally for the purpose of selling in the near future; or (ii) it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or (iii) it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as assets at FVTSI upon initial recognition if: (i) such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or (ii) the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or (iii) it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as assets at FVTSI.
Financial assets are stated at FVTSI, with any resultant gain or loss recognised in the consolidated statement of income. The net gain or loss recognised in the consolidated statement of income incorporates any dividends or interest earned on the financial asset.
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or the Group transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
Financial liabilities
Financial liabilities (including “trade payables and other credit balances”) are recognised initially at fair value, net of transaction costs incurred subsequently measured at amortised cost using the effective interest method.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the consolidated statement of income.
Offsetting
Financial assets and financial liabilities are only offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to set off the recognised amounts and the Group intends to settle on a net basis or realise the asset and settle the liability simultaneously.
3.9 Treasury shares
Treasury shares consist of the Parent Company’s own shares that have been issued, subsequently reacquired by the Parent Company and not yet reissued, sold or cancelled. The treasury shares are accounted for using the cost method. Under the cost method, the weighted average cost of the shares reacquired is charged to a contra equity account. When the treasury shares are reissued, gains are credited to a separate account in shareholders’ equity, which are not distributable. Any realized losses are charged to the same account to the extent of the credit
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balance on that account. Any excess losses are charged to retained earnings then to reserves, then share premium. Gains realised subsequently on the sale of treasury shares are first used to reduce any previously recorded losses in the account of share premium, reserves, retained earnings and gain on sale of treasury shares. No cash dividends are paid on these shares. The issue of bonus shares will increase the number of treasury shares proportionately and reduce the average cost per share without affecting the total cost of the treasury shares.
3.10 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the consolidated financial position date, taking into account the risks and uncertainties surrounding this obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
3.11 Provision for employees end of services indemnity
Provision for employees end of services indemnity is created and accrues upon completion of service period. The provision is calculated in accordance with Kuwait Labour Law based on employees’ salaries and accumulated periods of service or on the basis of employment contracts terms, where such contracts provide extra benefits. The unfunded provision is stated as a liability, which arises if the employee service is terminated at the date of consolidated financial position, based on the fact that this calculation represents an approximate basis used in determining the present value of this obligation.
3.12 Revenue recognition
Revenue from contracts with customers is recognised when it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria apply to each category of revenue:
Sale of goods
Revenue from sale of goods is recognized when performance obligation is satisfied and control is transferred to the customer. Revenue is measured at the fair value of consideration received or receivable at the time of transfer, net of returns, trade discounts and volume rebates.
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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Rendering of services
Revenue from services is recognized when the performance obligations is satisfied and control is transferred to customer.
Dividends
Dividend income is recognised when the right to receive payment is established.
Fees and Commissions
Fees and commission income are recognized at the time the related services are provided.
Rental income
Rental income from investment properties is recognized on a straight line basis over the lease period.
Profit margin on deposits
Profit margin on Islamic deposits is calculated on the accrual basis and is recognized in the statement of profit or loss and other comprehensive income in the period incurred.
3.13 Accounting for leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.
The Group as lessee
Assets held under finance leases are initially recognised in the consolidated statement of financial position as assets for the Group at its fair value at the beginning of lease or, if it was less, at the current value estimated for the minimum of amounts paid for lease. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation. Operating lease payments are recognised as an expense in the consolidated statement of income on a straight-line basis over the lease term.
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2018
3.14 Contribution to Kuwait Foundation for the Advancement of Sciences
Contribution to Kuwait Foundation for the Advancement of Sciences “KFAS” is calculated at 1% of the profit attributable to shareholders of the Parent Company before deducting the contribution to KFAS, NLST, Zakat provision and Board of Directors’ remuneration, and after excluding the Company’s share from profits of the shareholding subsidiaries and associates, transfer to statutory reserve and any accumulated losses.
Contribution to KFAS was not calculated for the year ended 31 December 2017 as there is no profit to be subject to calculation of KFAS contribution after deducting the accumulated losses of the Group.
3.15 National Labour Support Tax
NLST is calculated at 2.5% of the profit attributable to shareholders of the Parent Company before deducting KFAS, NLST, Zakat provision and Board of Directors’ remuneration, and after excluding the Company’s share from profits of the unconsolidated shareholding subsidiaries and associates listed in KSE, also its share in NLST paid by subsidiaries listed in KSE and cash dividends received from Companies listed in KSE, this is in accordance with Law No. 19 of 2000 and Ministerial Order No. 24 of 2006 and its implementing Executive Rules.
3.16 Zakat
Zakat is calculated at 1% of the profit attributable to shareholders of the Parent Company before deducting KFAS, NLST, Zakat provision and Board of Directors’ remuneration, and after excluding the Company’s share from profits of the unconsolidated Kuwait shareholding subsidiaries and associates, also Zakat share paid by the Kuwait shareholding subsidiaries and cash dividends received from Kuwait shareholding Companies. This is in accordance with Law No. 46 of 2006 and Ministerial Order No. 58 of 2007 and Executive Regulations.
Zakat is not calculated for the year ended 31 December 2017 as there is no financial profit to calculate Zakat based on it.
3.17 Foreign currency exchange
The consolidated financial statements have been presented in Kuwaiti Dinars (“KD”), which is also the functional and presentation currency of the Parent Company.
Transactions and balances
Transactions in currencies other than the Group’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of transactions. At each statement of financial position date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the statement of financial position date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Senergy Holding K.S.C.P Financial Statements
66
Annual Report
2018
the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the consolidated statement of income for the year. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the consolidated statement of income for the year except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in the consolidated statement of the other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in the consolidated statement of other comprehensive income.
Group companies’
The assets and liabilities of the Group’s foreign operations are expressed in KD using exchange rates prevailing at the statement of financial position date. Income and expense items are translated into the Group’s presentation currency at the average rate over the reporting period. Exchange differences are charged/ credited to other comprehensive income and recognised in the currency translation reserve in equity. On disposal of a foreign operation the cumulative translation differences recognised in equity are reclassified to statement of income and recognised as part of the gain or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into KD at the closing rate.
4. Critical accounting estimates and assumptions
In the process of applying the Group’s accounting policies which are described in Note 3, management has to use judgements, estimates and assumptions in determining the amounts recognised in the consolidated financial statements that are not readily apparent from other sources. The estimations and assumptions are based on the management’s pervious experiences and other relevant internal and external factors. Actual results may vary from these estimations. The estimates and underlying assumptions are revised on an ongoing basis. Adjustments to accounting estimates are recorded in the periods in which the review and adjustment of the estimates are made if the adjustment related to this particular period. Adjustments are recorded in the review period and future periods if these adjustments to estimates will impact the current period and future financial periods.
Classification of investment properties
The Group decides on acquisition of a real estate property whether it should be classified as trading, “property held for development” or “investment property”.
The Group classifies property as trading property if it is acquired principally for sale in the ordinary course of business.
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Financial Statements
67
Annual Report
2018
The Group classifies property as property under development if it is acquired with the intention of development.The Group classifies property as investment property if it is acquired to generate rental income or for capital appreciation, or for undetermined future use.
Classification of investments
Management decides on acquisition of an investment whether it should be classified as available for sale investments or as financial assets at fair value through statement of income. The Group classifies its investments as financial assets at fair value through statement of income if the investment is classified as held for trading and upon initial recognition it is designated by the Group as at fair value through statement of income. All other investments are classified as available for sale.
Impairment of tangible assets and useful lives
The Group’s management reviews the impairment of tangible assets annually according to the applicable accounting policies in Note 3. The recoverable value of an asset is calculated on the basis of value in use method. The method uses estimated cash flow projections over the estimated useful life of the asset discounted using market rates.
The Group’s management determines the useful lives, and the related depreciation amount. The depreciation amount charged for the year will change significantly if the actual useful life differs from the estimated useful life of the asset.
Intangible assets with indefinite useful lives are tested for impairment annually as at 31 December whether individually or at the level of cash-generating units, whenever appropriate, and when circumstances indicate that the carrying value have impaired.
Impairment of inventories
The extent of the inventory provision requires estimates. The carrying amount of inventories are reduced and included at net realisable selling value when damaged or become obsolete, wholly or partly, or when the selling price goes down. The benchmarks for determining the amount of provision or amount to be written-off include ageing analysis, technical assessment and subsequent events. The provisions recognition and write-down of inventory are subject to management approval.
Impairment of Financial Assets
The Group’s management periodically reviews the items classified as receivables so as to determine the need for including an impairment provision in the consolidated statement of income. Management estimates the amount and date of future cash flows when determining the level of required provisions. These estimations are based on assumptions concerning several elements including variant degrees of judgments and uncertainty.
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Senergy Holding K.S.C.P Financial Statements
68
Annual Report
2018
5.
Prop
erty
, pla
nt a
nd e
quip
men
t
Leas
ehol
d la
nds
Land
rigs
Build
ings
Furn
itur
e &
fixt
ures
Offi
ce
equi
pmen
t
Mac
hine
ry
&
equi
pmen
tVe
hicl
es
Capi
tal
wor
k in
pr
ogre
ssTo
tal
KDKD
KDKD
KDKD
KDKD
KD
Cost
Bala
nce
at 1
Janu
ary
2018
6,65
61,
400,
000
383,
395
451,
850
241,
082
6,37
1,35
82,
573,
833
781,
691
12,2
09,8
65
Addi
tions
-
-2,
797
171
16,5
3845
2,22
912
,946
-48
4,68
1
Der
ecgo
nise
d on
dis
posa
ls-
(1,4
00,0
00)
--
--
-(5
14,4
70)
(1,9
14,4
70)
Tran
sfer
s-
-26
7,22
1-
--
-(2
67,2
21)
-
Effec
t of c
hang
e in
fore
ign
curr
enci
es(1
,361
)-
(19,
722)
(2,9
54)
(10,
012)
(425
,865
)(3
,574
)-
(463
,488
)
31 D
ecem
ber 2
018
5,29
5-
633,
691
449,
067
247,
608
6,39
7,72
22,
583,
205
-10
,316
,588
Acc
umul
ated
dep
reci
atio
n an
d im
pair
men
t
Bala
nce
at 1
Janu
ary
2018
-
1,40
0,00
023
7,03
243
9,40
520
1,08
23,
810,
996
2,03
9,15
651
4,47
08,
642,
141
Dep
reci
atio
n-
-18
,023
11,4
478,
849
560,
452
162,
072
-76
0,84
3
Der
ecgo
nise
d on
dis
posa
ls-
(1,4
00,0
00)
--
--
-(5
14,4
70)
(1,9
14,4
70)
Effec
t of c
hang
e in
fore
ign
curr
enci
es-
-(1
5,15
8)(2
,899
)(8
,012
)(2
91,9
14)
(3,5
22)
-(3
21,5
05)
31 D
ecem
ber 2
018
--
239,
897
447,
953
201,
919
4,07
9,53
42,
197,
706
-7,
167,
009
Net
car
ryin
g va
lue
At 3
1 D
ecem
ber 2
018
5,29
5-
393,
794
1,11
445
,689
2,31
8,18
838
5,49
9-
3,14
9,57
9
Rate
of D
epre
ciat
ion
--
5 –
10%
15 –
20%
15 –
20%
10 –
50%
25%
-
Dep
reci
atio
n ch
arge
for t
he y
ear w
as a
lloca
ted
as fo
llow
s:
2018
2017
KDKD
Ope
ratin
g co
sts
736,
629
829,
899
Cons
olid
ated
sta
tem
ent o
f inc
ome
24,2
1434
,312
760,
843
864,
211
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Financial Statements
69
Annual Report
2018
Leas
ehol
d la
nds
Land
rigs
Build
ings
Furn
itur
e &
fixt
ures
Offi
ce
equi
pmen
t
Mac
hine
ry
&
equi
pmen
tVe
hicl
es
Capi
tal
wor
k in
pr
ogre
ssTo
tal
KDKD
KDKD
KDKD
KDKD
KDCo
st
Bala
nce
at 1
Janu
ary
2017
1,
148,
172
1,40
0,00
038
8,97
644
9,90
223
7,62
26,
340,
179
1,94
1,47
81,
212,
703
13,1
19,0
32
Addi
tions
-
-1,
757
3,06
76,
979
907,
107
11,8
00-
930,
710
Dis
posa
ls(1
,141
,000
)-
--
-(7
5,70
1)(1
5,31
6)(4
31,0
12)
(1,6
63,0
29)
Tran
sfer
s-
--
--
(637
,202
)63
7,20
2-
-
Effec
t of c
hang
e in
fore
ign
curr
enci
es(5
16)
-(7
,338
)(1
,119
)(3
,519
)(1
63,0
25)
(1,3
31)
-(1
76,8
48)
31 D
ecem
ber 2
017
6,65
61,
400,
000
383,
395
451,
850
241,
082
6,37
1,35
82,
573,
833
781,
691
12,2
09,8
65
Acc
umul
ated
dep
reci
atio
n an
d im
pair
men
tBa
lanc
e at
1 Ja
nuar
y 20
17
-1,
400,
000
216,
847
428,
798
195,
805
3,53
2,88
41,
644,
173
514,
470
7,93
2,97
7
Dep
reci
atio
n-
-25
,318
11,6
707,
988
636,
860
182,
375
-86
4,21
1
Dis
posa
ls-
--
--
(35,
670)
(8,7
44)
-(4
4,41
4)
Tran
sfer
s-
--
--
(222
,678
)22
2,67
8-
-
Effec
t of c
hang
e in
fore
ign
curr
enci
es-
-(5
,133
)(1
,063
)(2
,711
)(1
00,4
00)
(1,3
26)
-(1
10,6
33)
31 D
ecem
ber 2
017
-1,
400,
000
237,
032
439,
405
201,
082
3,81
0,99
62,
039,
156
514,
470
8,64
2,14
1
Net
car
ryin
g va
lue
At 3
1 D
ecem
ber 2
017
6,65
6-
146,
363
12,4
45
40,0
00
2,56
0,36
2 53
4,67
7 26
7,22
1 3,
567,
724
Rate
of D
epre
ciat
ion
--
5 –
10%
15 –
20%
15 –
20%
10 –
50%
25%
-
Dur
ing
the
year
, the
Gro
up s
old
leas
ehol
d la
nd a
nd o
ther
ass
ets
by K
D 1
,900
,000
and
KD
8,5
22 re
spec
tivel
y an
d re
cogn
ised
a g
ain
of
KD 7
59,4
38 a
nd re
cord
ed to
con
solid
ated
sta
tem
ent o
f inc
ome.
Dep
reci
atio
n ch
arge
for t
he y
ear w
as a
lloca
ted
as fo
llow
s:
2017
2016
KDKD
Ope
ratin
g co
sts
829,
899
994,
920
Cons
olid
ated
sta
tem
ent o
f inc
ome
34,3
1239
,362
864,
211
1,03
4,28
2
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Senergy Holding K.S.C.P Financial Statements
70
Annual Report
2018
6. Investment properties
Investment properties are initially recognised at cost, including other related costs.
Lease hold land Buildings Total
KD KD KD
Cost at:
1 January 2018 1,211,000 1,306,179 2,517,179
31 December 2018 1,211,000 1,306,179 2,517,179
Accumulated depreciation at:
1 January 2017 - 620,289 620,289
Charged during the year - 65,307 65,307
31 December 2017 - 685,596 685,596
Charged during the year - 65,307 65,307
31 December 2018 - 750,903 750,903
Net book value at:
31 December 2018 1,211,000 555,276 1,766,276
31 December 2017 1,211,000 620,583 1,831,583
In accordance with the Group’s policy, investment properties are depreciated over their estimated useful life of 20 years.
The fair value of the investment properties as at 31 December 2018 was KD 3,075,000 (2017: KD 2,970,000) based on independent valuer’s valuations.
7. Goodwill2018 2017
KD KD
Balance at beginning of the year 6,820,396 6,820,396
Balance at end the year 6,820,396 6,820,396
8. Available for sale investments2018 2017
KD KD
Unquoted local shares - 107,310
Unquoted foreign shares - 216,675
- 323,985
Management reviewed available for sale investment value and recognised an impairment of KD Nil (2017: 162,673) at consolidated statement of comprehensive income.
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Financial Statements
71
Annual Report
2018
9. Financial assets at fair value through other comprehensive income
2018 2017
KD KD
Unquoted local shares 81,193 -
81,193 -
Movement in the financial assets at fair value through other comprehensive income is as follows:
2018 2017
KD KD
Reclassification of available for sale investments on adoption of IFRS 9 323,985 -
Change in fair value (25,775) -
Disposals (217,017) -
81,193 -
10. Inventories
2018 2017
KD KD
Inventories 830,712 956,196
Provision of slow moving inventories (500,000) (500,000)
330,712 456,196
11. Trade receivables and other debit balances
2018 2017
KD KD
Trade receivables 4,735,018 5,346,203
Advance payments 479,071 299,776
Provision for doubtful debts (2,443,585) (2,366,371)
2,770,504 3,279,608
Refundable deposits 46,383 83,099
Accrued revenues 419,204 455,108
Projects income 9,735 1,478,066
Prepaid expenses 131,862 118,404
Staff receivables 57,005 28,215
Letter of guarantee 12,055 233,384
Other receivables 196,968 111,835
3,643,716 5,787,719
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Senergy Holding K.S.C.P Financial Statements
72
Annual Report
2018
During the prior year, the Parent Company filed a lawsuit against a contractor involved in projects in progress in Dubai U.A.E. The Executive court in Dubai ordered payment of Emirati Dirham 19,000,000 equivalent to KD 1,559,710 for the benefits of the Parent company. The Parent Company paid legal fees of KD 81,652 relating to this lawsuit. Since project in progress was previosuly imapired and remaining amount of KD 429,490 which was included in the capital work-in-progress has been transferred to project income included in trade receivables and other debit balances, the Group recorded reversal of impairment in the amount of KD 1,130,220 in the consolidated statement of income.
Average of credit period granted to the trade receivables is 60 days. The Group does not calculate interests on overdue trade receivables balances not paid. The Group has recognised a provision for all irrecoverable receivables, based on past experience.
As of 31 December, aging of trade receivables and advance payments were as follows:
2018 2017
KD KD
Up to 60 days 257,183 2,194,311
Past due but not impaired
61 – 120 days 89,794 585,786
121 – 365 days 109,673 499,511
Past due and impaired
More than 365 days 4,278,368 2,366,371
4,735,018 5,645,979
The movement in the provision for doubtful debts is as follows:
2018 2017
KD KD
Opening balance 2,366,371 2,238,998
Provision during the year 114,033 202,737
Reversal of provision (31,045) -
Used during the year - (73,176)
Exchange differences on translation of foreign operations (5,774) (2,188)
Closing balance 2,443,585 2,366,371
12. Related party transactions
Related parties primarily comprise of directors, key management personnel, subsidiaries, shareholders and Companies of which the Parent Company is principal owner or over which they are able to exercise significant influence. All related party transactions are carried at terms approved by the Group’s management. All balances and transactions between the Parent
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Financial Statements
73
Annual Report
2018
Company and its subsidiaries, which are related parties of the Group, have been eliminated on consolidation and are not disclosed in this note.
2018 2017
KD KD
Balances included in the consolidated statement of financial position:
Financial assets at fair value through profit or loss (Note 14) 5,801 6,674
Due from related parties:
Due from related parties 447,389 446,046
Less: provision for doubtful debts (183,419) (183,419)
263,970 262,627
Transactions included in the consolidated statement of income:
General and administrative expenses 2,473 724
Senior management staff benefits and salaries
Salaries and other short term benefits 338,537 152,850
End of service benefits 29,700 10,768
368,237 163,618
Balances due from/to related parties are interest free and receivable/payable on demand.
13. Wakala receivables2018 2017
KD KD
Wakala receivables 1,703,404 453,404
1,703,404 453,404
The Group concluded agreement of investment agency with an Islamic financial institution at average effective rate of 2.125% (2017: 2.125%). Wakala receivables are against letter of guarantee.
14. Financial assets at fair value through profit or loss2018 2017
KD KD
Local managed portfolio 5,801 6,674
5,801 6,674
Local portfolio is managed by a related party (Al-Safat Investment Company K.S.C. (Closed)) (Note 12).
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Senergy Holding K.S.C.P Financial Statements
74
Annual Report
2018
15. Cash and bank balances
2018 2017
KD KD
Cash on hand 22,147 12,031
Cash at banks 2,277,312 3,366,336
2,299,459 3,378,367
16. Share capital
The authorized, issued and fully paid up share capital is KD 20,000,000 (2017: KD
20,000,000) and comprises of 200,000,000 shares (2017: 200,000,000) each of a nominal
value of 100 fils. All shares are in cash.
17. Share premium
The share premium arises from the excess of the issued share price and the nominal value
of the shares. The share premium account is not available for distribution.
18. Treasury shares
2018 2017
Number of shares 836,629 277,468
Percentage of issued shares (%) 0.14 0.14
Market value (KD) 7,908 9,711
Cost (KD) 181,866 181,866
The Parent Company is committed to keeping reserves and retained profits equal to
the purchased treasury shares which are non-distributable along acquisition period
according to the instructions of the concerned regulatory authorities.
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Financial Statements
75
Annual Report
2018
19.
Subs
idia
ries
wit
h no
n-co
ntro
lling
inte
rest
s at
mat
eria
l per
cent
ages
to th
e G
roup
Nam
e of
sub
sidi
ary
Coun
try
of
inco
rpor
atio
n
Shar
es p
erce
ntag
e fr
om
the
non-
cont
rolli
ng
inte
rest
s as
at 3
1 D
ecem
ber
Profi
t/(lo
ss) a
ttri
buta
ble
to n
on-c
ontr
ollin
g in
tere
sts
as a
t 31
Dec
embe
r
Acc
umul
ated
non
-co
ntro
lling
inte
rest
s a
s at
31
Dec
embe
r
2018
2017
2018
2017
2018
2017
KDKD
KDKD
Sene
rgy
Serv
ices
Com
pany
K.S
.C.
(Clo
sed)
and
its
subs
idia
ries
Stat
e of
Kuw
ait
5.42
%8.
95%
(30,
866)
84,1
182,
286,
080
4,02
0,06
1
Indi
vidu
al im
mat
eria
l sub
sidi
arie
s an
d ha
ve n
on-c
ontr
ollin
g in
tere
sts
(2,4
46)
(4,4
24)
30,4
5332
,731
Tota
l(3
3,31
2)79
,694
2,31
6,53
34,
052,
792
Sum
mar
y of
fina
ncia
l inf
orm
atio
n fo
r sub
sidi
arie
s w
ith n
on-c
ontr
ollin
g in
tere
sts
at m
ater
ial p
erce
ntag
es to
the
Gro
up:
Sum
mar
y of
sta
tem
ent o
f fina
ncia
l pos
itio
n:
Sene
rgy
Serv
ices
Com
pany
K.S
.C. (
Clos
ed)
2018
2017
KDKD
Non
-cur
rent
ass
ets
8,17
0,02
68,
687,
485
Curr
ents
ass
ets
7,18
2,52
38,
566,
495
Non
-cur
rent
liab
ilitie
s(4
71,4
60)
(595
,944
)
Curr
ent l
iabi
litie
s(2
,069
,451
)(2
,645
,323
)
Net
equ
ity
12,8
11,6
3814
,012
,713
Net
equ
ity a
ttrib
utab
le to
sha
reho
lder
s of
the
Pare
nt C
ompa
ny10
,525
,558
9,99
2,65
2
Net
equ
ity
attr
ibut
able
to n
on-c
ontr
ollin
g in
tere
sts
2,28
6,08
04,
020,
061
Notes to the consolidated financial statementsFor the year ended 31 December 2018
Senergy Holding K.S.C.P Financial Statements
76
Annual Report
2018
Summary of statement of income and other comprehensive income:
Senergy ServicesCompany K.S.C. (Closed)
2018 2017
KD KD
Revenues 2,913,747 3,157,425
Expenses (3,111,408) (2,303,780)
Net profit/ (loss) (197,661) 853,645
Other comprehensive (loss)/ income (423,178) (112,495)
Total comprehensive income/ (loss) (620,839) 741,150
Net profit/ (loss) attributable to shareholders of theParent Company (176,357) 845,139
Net profit/ (loss) attributable to non-controlling interests (21,304) 8,506
Other comprehensive (loss)/ income attributable to shareholders of the Parent Company (307,751) (101,997)
Other comprehensive (loss)/ income attributable tonon-controlling interests (115,427) (10,498)
Total comprehensive income/ (loss) attributable to shareholders of the Parent Company (484,108) 743,142
Total comprehensive (loss) attributable to non-controlling interests (136,731) (1,992)
20. Trade payables and other credit balances
2018 2017
KD KD
Trade payables 1,224,960 2,087,231
Dividends payables 403,008 403,008
Accrued expenses 175,491 173,006
Provision for staff leave 112,381 108,534
Refundable deposits 18,893 25,697
Provision for employees’ incentives 18,054 30,429
Discounts provision 50,000 82,500
Tax provision 48,192 65,937
Zakat 8,402 18,269
National Labour Support Tax - 4,400
Other 299,949 273,346
2,359,330 3,272,357
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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21. General and administrative expenses
2018 2017
KD KD
Salaries and other benefits 732,651 724,178
Rent 85,497 98,776
Consultancy fees 78,455 102,115
Travel expenses 37,579 42,177
Investment expenses 3,856 864
Professional and legal fees 114,370 403,703
Insurance 22,078 22,541
Government fees 35,373 55,646
Repair and maintenance 22,488 23,536
Subscriptions 16,663 16,790
Other expenses 147,784 172,475
1,296,794 1,662,801
22. Tax provision for foreign subsidiaries
A provision is made to offset the taxes related to subsidiaries as per tax policies regulating tax calculation in each country. When tax accounting is made to Companies, it is offset with this provision, then differences resulted from this transaction are treated from an accounting
perspective.
23. Basic and diluted (loss) / earnings per share (fils)
(Loss) / earnings per share is computed by dividing the (loss) / profit attributable to shareholders of the Parent Company by the weighted average number of shares outstanding during the year,
taking into account treasury shares:2018 2017
(Loss) / profit for the year attributable to shareholders of the Parent Company (KD) (534,690) 71,870
Weighted average number of outstanding shares less treasury shares (Nos.) 199,722,532 199,722,532
Basic and diluted (loss) / earnings per share attributable to shareholders of the Parent Company (Fils) (2.68) 0.36
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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24. Segmental information
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses and whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
a) Segment reporting
The Group considers that the operating units which offer products and special services constitute segments that are disclosed and reported as follows:
Investment management: The investment management segment is responsible for investing surplus funds in portfolios to maximize yield, incorporate or acquire subsidiaries and associates to expand Group’s operations, and to maintain adequate share capital for the Group’s needs.
Drilling and maintenance: Support activities to oil well drilling and related maintenance.
Financial information about business segments for the year ended 31 December 2018 is as follows:
Investment management
Drilling and maintenance
operations Total
KD KD KD
31 December 2018
Total income 649,580 2,913,747 3,563,327
Segment results (356,592) (211,406) (567,998)
Segment assets 9,454,847 10,614,855 20,069,701
Segment liabilities 697,106 2,287,630 2,984,736
Financial information about business segments for the year ended 31 December 2017 is as follows:
Investment management
Drilling and maintenance
operations Total
KD KD KD
31 December 2017
Total income 2,362,166 3,157,425 5,519,591
Segment results (592,077) 743,641 151,564
Segment assets 10,500,607 12,394,598 22,895,205
Segment liabilities 700,060 3,334,940 4,035,000
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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b) Geographical Segments
The Group is principally operating inside the State of Kuwait. Financial information about geographical segments is set out below:
31 December 2018State of Kuwait Middle East Asia Total
KD KD KD KD
Total revenues 2,702,237 861,090 3,563,327
Segment results (522,141) (13,742) (32,115) (567,998)
Segment assets 17,676,479 265,580 2,123,417 20,065,476
Segment liabilities 2,264,089 1,030 719,616 2,984,735
31 December 2017State of Kuwait Middle East Asia Total
KD KD KD KD
Total revenues 4,386,621 - 1,132,970 5,519,591
Segment results 426,970 (110,000) (165,406) 151,564
Segment assets 19,554,802 480,086 2,860,317 22,895,205
Segment liabilities 2,886,575 203,205 945,220 4,035,000
The geographical segments of the Middle East include UAE, Bahrain and Egypt.
25. Financial instruments
Categories of financial instruments2018 2017
KD KD
Financial assets
Available for sale investments - 323,985
Financial assets at fair value through other comprehensive income 81,193 -
Term deposits 5,195 6,530
Trade receivables and other debit balances (excludingadvances and prepaid expenses) 3,032,783 5,369,539
Due from related parties 263,970 262,627
Wakala receivables 1,703,404 453,400
Financial assets at fair value through profit or loss 5,801 6,674
Bank balances 2,277,312 3,366,336
Financial liabilities
Trade payables and other credit balances 2,359,330 3,272,357
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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a) Capital risk management
The Group objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, through the optimisation of the debt and equity balance so that it can continue to provide returns for shareholders and benefits for other stakeholders and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Group’s sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments in the light of changes in economic conditions and risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or debt and or sell assets to reduce debt. The Group is mainly financed by its contributed share capital with limited dependence on debt financing.
b) Financial risk management
The Group monitors and manages financial risks related to the Group operations through internal risk reports concerning the analysis of risk exposure with regard to the degree and scale of risks. These risks include market risk including (foreign currency risk, interest rate risk, equity risk), credit risk, and liquidity risk.
Market risk
Market risk is represented in the risk that changes in market prices, such as foreign exchange rates and equity risk may affect the volume of the Group’s income or the value of its financial instruments. Market risk management aims at handling and monitoring market risk exposure to be within acceptable limits, while maximizing the revenues.
i) Foreign currency risk
Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group undertakes some transactions in foreign currencies, and hence the risk of exposure to fluctuations in exchange rates arises. The management monitors the positions on a daily basis to ensure positions are maintained within established limits.
The recognised values of the Group’s monetary assets and liabilities valued in foreign currencies as at the reporting date are as follows:
Liabilities Assets
2018 2017 2018 2017
KD KD KD KD
USD 1,338,659 1,375,799 2,492,063 2,190,455
Pakistani Rupee 784,141 1,136,996 1,017,175 3,551,364
Bahraini Dinar 59,820 203,206 324,369 480,086
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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ii) Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Group is not currently exposed to these risks.
Foreign currency sensitivity analysis
Change in currency
rate %
2018 2017
Currency
Effect on profit for the year
Effect on equity
Effect on profit for the
yearEffect on
equity
KD KD KD KD
USD +5% 57,670 - 40,733 -
Pakistani Rupee +5% - 11,652 - 120,718
Bahraini Dinar +5% - 13,227 - 13,844
iii) Equity risk
Equity risk is the risk that the fair value of shares will fluctuate due to changes in the level of shares indices or the value of individual share prices. Equity risk arises from the change in fair value of equity investments. The effect on profit (as a result of a change in the fair value of equity investments held at FVTSI) If prices of financial securities had been increased/decreased by 5% with all other variables held constant, the effect on the result for the year and equity would have been as follows:
Change in equity price
Effect on profit
2018 2017
KD KD
Financial assets at fair value through profit or loss 5% 290 334
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group’s credit policy and exposure to credit risk is monitored on an ongoing basis. The Group seeks to avoid undue concentration of risks with individuals or group of customers in specific locations or business through diversification of lending activities and obtaining the suitable guarantees when appropriate.
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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Credit risk exposure
The book values for financial assets represent the maximum exposure to credit risks. The maximum net exposure to credit risk for assets categories at the reporting date was as follows:
2018 2017
KD KD
Term deposits 5,195 6,530
Receivables and other debit balances (excluding advances and prepaid expenses) 3,032,783 5,369,539
Due from related parties 263,970 262,627
Wakala receivables 1,703,404 453,404
Bank balances 2,277,312 3,366,336
7,282,664 9,458,436
Credit concentration risk
Concentration arises when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by charge in economic, political or other conditions. Concentration indicates the relative sensitivity of the Group’s performance to developments affecting in particular industry or geographical location.
Analysis of the Group’s financial assets that are exposed to credit risk by geographic segment and business sector is as follows:
2018 2017
KD KD
Geographical segment:
Kuwait 6,589,957 8,558,776
Gulf Cooperation Council Countries 202,823 263,418
Middle East - -
Asia 489,884 636,242
7,282,664 9,458,436
Business sector:
Drilling and maintenance operations 1,641,339 1,997,702
Investment 3,364,013 4,094,398
Banks 2,277,312 3,366,336
7,282,664 9,458,436
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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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 ultimate responsibility for liquidity risk management lies on the Board of Directors, which approved an appropriate framework for liquidity risk management to manage the short, medium and long term funding of the Group, in addition to the requirements of the liquidity management. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Group’s liabilities are maturing within less than one year.
c) Fair value of financial instruments
Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group’s management believes that the fair value of financial assets and liabilities as at 31 December approximates their carrying value.
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, Grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
• Level1:inputsarequotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilitiesthat the entity can access at the measurement date.
• Level2:inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefortheasset or liability, either directly or indirectly.
• Level3:inputsareunobservableinputsfortheassetorliability.
31 December 2018 Level 1 Total
KD KD
Financial assets at fair value through statement of income
Managed portfolio 5,801 5,801
5,801 5,801
31 December 2017 Level 1 Total
KD KD
Financial assets at fair value through statement of income
Managed portfolio 6,674 6,674
6,674 6,674
Notes to the consolidated financial statementsFor the year ended 31 December 2018
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26. Contingent liabilities
As at 31 December, the Group had the following contingent liabilities:
2018 2017
KD KD
Letters of guarantee 2,151,588 779,295
2,151,588 779,295
27. Annual General Assembly
The annual general assembly of the shareholders was held on 13 June 2018 and approved the consolidated financial statements for the year ended 31 December 2017. It also approved non-distribution of dividends for the financial year ended 31 December 2017.