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Aamal Company Q.P.S.C.Annual Report 2018

STRENGTH THROUGH DIVERSITY

In the Name of Allah Most Gracious Most Merciful

His Highness Sheikh Tamim Bin Hamad Al Thani, Emir of the State of Qatar

Aamal Company Q.P.S.C. Annual Report 2018

Overview

Aamal’s Four Segments

Industrial Manufacturing

More information available on Operational Review

section on page 25


section on page 32


section on page 34

Managed Services

PropertyTrading and Distribution


section on page 29

Aamal Company is one of the Gulf region’s largest and fastest-growing diversified conglomerates, offering

investors a high quality and balanced exposure to Qatar’s economic

growth and development.

1


Overview

Overview

Highlights of the Year 2

Board of Directors 5

At a Glance 6

Strategic Report

Business Strategy 8

Chairman’s Statement 10

Market Review by Segment 12

CEO and Managing Director’s Report 14

Investment Rationale 16

Sustainability Framework and ESG Disclosures 17

Operational Review – by Segment 24

Corporate Social Responsibility (CSR) 38

Corporate Governance

Corporate Governance Framework 40

Executive Management 45

Organisational Structure 46

Annual Ordinary and Extra Ordinary

General Assembly Meeting 47

Financials

Independent Auditor’s Report 48

Financial Statements and Notes 52

This report refers to Aamal Company Q.P.S.C. (herein after referred to as “Aamal” or “the Company”).

2

22.4%

53.7%

17.0%

6.9% 1.7%

50.7%

26.3%

21.3%


Overview

Revenue (QAR)

1,286.6mNet Profit (QAR)

447.6m

Generating revenues of QAR 1,286.6m, Aamal Company’s success

story reflects Qatar’s resilient economy and its successful strategy of economic diversification. Aamal’s growth is testament to the support

of the private sector and the Company’s ability to support the

Government’s goals.

Net profit percentages are before head office cost

Highlights of the Year

Property Trading and Distribution Industrial Manufacturing Managed Services

Property Trading and Distribution Industrial Manufacturing Managed Services

3

19%

11%

25%

45%


Overview

– Total revenue down 19.8% to QAR 1,286.6m (2017: QAR 1,604.2m), primarily due to the reclassification of two business entities within the Industrial Manufacturing segment from subsidiaries to joint ventures from 1 April 2017

– Gross profit down 14.4% to QAR 467.2m (2017: QAR 545.6m)

– Net profit before share of net profits of associates and joint ventures, accounted for using the equity method and fair value gains on investment properties (“net underlying profit”), down 17.4% to QAR 347.6m (2017: QAR 421.0m)

– Net underlying profit margins increased 0.7 percentage points to 27.0% (2017: 26.3%)

– Share of net profits from associates and joint ventures, accounted for using the equity method, decreased 2.0% to QAR 100.0m (2017: QAR 102.0m)

– There were no fair value gains on investment properties during 2018, or in 2017

– Total Company net profit1 down 14.4% to QAR 447.6m (2017: 523.1m), with net prof it attributable to Aamal equity holders down 11.1% to QAR 445.3m (2017: QAR 500.9m)

– Reported earnings per share decreased 11.3% to QAR 0.71 (2017: QAR 0.80)

– Net capital expenditure up 172.0% to QAR 289.7m (2017: 106.5m), ref lecting variations in contractor billing profiles that are milestone-based

1 Total Company net profit is before the deduction of net profit attributable to non-controlling interests

Financial Highlights

Shareholder Structure

Corporate (minus Al Faisal Holding shares) Individual (minus Sheikh Faisal shares) Major Shareholder (Sheikh Faisal Bin Qassim Al Thani) Major Shareholder (Al Faisal Holding)

4


Overview

– Further strengthened compliance with the QFMA’s Corporate Governance Code, ensuring Aamal’s leadership continues to drive and del iver long-term excellence:

– Board restructured, including the addition of three new independent directors. The breadth and depth of experience they provide positions the Board extremely well to lead the Company forward.

– Completed all amendments to the Articles of Association of the Company in accordance with requirements of the QFMA’s Corporate Governance Code for listed companies and legal entities.

– Successfully submitted Aamal’s first ESG report.

– Completed the design of Aamal’s internal control processes which will have a valuable impact on the Company’s operations. The internal controls are designed with the purpose of improving credibility, increasing the accuracy and reliability of the financial statements, and reducing risk. With increased assurance, management will be able to deliver policies and attain corporate goals with confidence.

– Aamal Company has completed the sale of the treasury shares of Aamal Q.P.S.C. owned by Gulf Rocks Company.

– The Annual General Assembly will discuss Aamal’s plans to implement a 10 for 1 stock split in compliance with the stock split directive issued by the QFMA to all QSE listed companies. This market-wide initiative aims to make trading in QSE-listed shares more accessible and attractive to retail investors, and to improve liquidity and trading volumes on the QSE.

– Aamal Real Estate has successfully expanded its residential portfolio through a number of acquisitions comprising 24 villas, and two buildings containing 20 apartments and it successfully completed the construction of a 63-apartment residential building.

– Ebn Sina Medical – a fully owned subsidiary – opened a new pharmacy in Ras Abu Aboud and installed the first ever robot pharmacy in Qatar at City Center Doha.

– Aamal Readymix, the largest subsidiary of the Industrial Manufacturing segment, completed the installation and commissioning of five production plants at the recently renovated Bu-Qalila site. Furthermore, it has increased its overall storage capacity of raw material by 50,000 tonnes.

– The three new industrial projects being undertaken by Senyar Industries Qatar Holding for the production of copper, drums and aluminium are each progressing in line with their respective schedules.

Non-Financial Highlights

Aamal strengthened its compliance with the QFMA corporate governance code, ensuring

its leadership continues to drive and deliver long-term excellence.

5


Overview

Sheikh Faisal Bin Qassim Al ThaniChairman of the Board of Directors Non-Executive

Sheikh Jabr Bin Abdulrahman Al Thani Board Member Non-Executive

Mr. Yousef Bin Rashid Al KhaterIndependent Board Member Non-Executive

Sheikh Mohammed Bin Faisal Al Thani Vice Chairman and Managing Director Executive

Sheikha Al Jazi Bint Faisal Al ThaniBoard Member Non-Executive

Mr. Faisal Bin Abdullah Bin Zaid Al MahmoudIndependent Board Member Non-Executive

Sheikh Abdullah Bin Hamad Al ThaniBoard Member Non-Executive

Mr. Kamel Mohamed Al AglaBoard Member Non-Executive

Mr. Hamad Rashid Ali Al Mansoor Al NuaimiIndependent Board Member Non-Executive

Board of Directors

The board’s full experience / CV can be found on page 42 in the Corporate Governance Report.

6


Overview

At a Glance

Aamal Company is one of the Gulf region’s largest and fastest-growing diversified conglomerates, offering investors a high quality and balanced exposure to Qatar’s economic growth and development.

Our corporate strategy has always been to create and enhance long-term shareholder value through profitable growth and diversification, with particular reference to:– Offering high quality products and services– Being alert and responsive to the markets’

evolving needs– Acting as a socially responsible member of society,

adopting ethical and sustainable policies geared towards protecting the environment and looking after the welfare of its employees

– Incorporated in 2001 in Qatar. – Listed on the Qatar Stock Exchange in 2007. – Geographical focus on Qatar at present with intentions to

expand further in the region. – Operations across 26 active business units with market leading

positions in key grow th sectors including industrial manufacturing, retail, real estate, managed services and the medical equipment and pharmaceutical sectors.

– Strategy focused on three pillars for sustained, profitable growth:I. Increasing focus on industrial manufacturing and related

high-growth sectors;II. continued growth, diversif ication and innovation across

existing businesses to enhance market positions and optimise performance; and

III. continued application of clear and disciplined operational and financial principles underlying our strategic growth initiatives.

– Uniquely positioned to benefit from increased private and public sector demand, particularly for infrastructure development, as Qatar transforms into an advanced and self-sustaining economy.

– Strong backing from Al Faisal Holding Company, a long-term major shareholder of Aamal.

Five-year financial summary

QAR m 2018 2017 2016 2015 2014

Revenue 1,286.6 1,604.2 2,829.1 2,881.9 2,139.1

Gross Profit 467.2 545.6 683.4 642.1 506.0

Gross Profit Margin % 36.3% 34.0% 24.2% 22.3% 23.7%

Net Profit (before fair value gain on investment properties 447.6 523.1 559.4 521.3 348.5

Net Underlying Profit Margin (Before Fair Value Gain1 %) 27.0% 26.3% 17.6% 16.6% 15.4%

Fair Value Gains on Investment Properties 0.0 0.0 0.9 135.4 251.7

Total Company Net Profit for the year 447.6 523.1 560.2 656.7 600.2

Profit attributable to equity holders of the parent 445.3 500.9 462.3 601.0 577.1

Reported EPS (based on the Disclosed Financial Statement) 0.71 0.80 0.73 0.95 0.96

Rebased EPS2 0.71 0.80 0.73 0.95 0.922

Dividend per share (QAR)3 0.604 0.60 0.60 NIL 1.505

1. Excluding share of profit from equity accounted for investments in associates and joint ventures2. Reported EPS for prior years have been re-based using the current number of shares in issue (630million) to facilitate like-for-like comparisons3. Assume payable in cash unless otherwise stated 4. Subject to approval at the Annual Ordinary General Assembly Meeting (15 April 2019) 5. Comprised of two elements: QAR 1.0 in cash and QAR 0.5 in bonus shares (i.e. 5% of each share’s nominal value of QAR 10; total number of shares in issue increased to 630

million (600 million previously))

77


Overview

Functional Chart

Business units with effective Aamal ownership (%)

* Subsidiaries not fully owned by Aamal** Equity accounted for investment in Associates and Joint Ventures *** Inactive business unit currently under evaluation **** Business unit currently in liquidation


Managed Services

PropertyTrading and Distribution

Aamal Readymix 100%

Aamal Cement 99% Industries*

Ci-San Trading* 50%

• Aamal for Maritime 74.7% Transportation Services*

• Gulf Rocks* 74.5%

Senyar Industries 50% Qatar Holding**

• El Sewedy 38.3% Cables Qatar**

• Doha Cables** 47.3%

• Senyar for Producing Copper Rod** 50%

• Senyar Factory for Drums** 50%

• Senyar for Producing Aluminum Rod** 50%

Advanced Pipes and Casts Company** 50%

Frijns Structural 20% Steel Middle East**

Aamal for Industrial 100% Projects

Innovative 70% Lighting****

IMO Company 100% Qatar ***

Aamal Trading 100% and Distribution

Aamal Medical 100%

Ebn Sina Medical 100%

Ebn Sina Health 100% Care Pharmacy Solutions

Foot Care Centre 100%

Legend for Trading 100% and Distribution

Aamal Car 100% Maintenance

Aamal Optical 51% Supplies****

City Center 100% Company

Aamal Real Estate 100%

Aamal – ECE** 51%

Aamal Travel 100% and Tourism

Aamal Services 100%

ECCO Gulf* 51%

Family 100% Entertainment Center

Winter Wonderland 100%

Al Farazdaq Company 65%

Johnson Controls 51% Qatar****

8


Strategic Report

Delivering Growth

The Company seeks to take advantage of the growth opportunities provided by the Qatar National Vision 2030, and to leverage its position as a leading participant across various key economic sectors. Aamal Company intends to achieve this through an assiduous focus on three pillars for sustained, profitable growth:1. an increased focus on industrial

manufacturing and related high- growth sectors to capitalise on the significant demand arising from wider industrialisation of the Qatari economy;

2. continued growth, diversification and innovation across existing businesses to strengthen market positions and optimise performance; and

3. continued application of clear and disciplined operational and financial principles underpinning our strategic growth initiatives.

Through leveraging its significant hydrocarbon surpluses, Qatar aims to transform itself into a diversified and knowledge-based economy. To date, this has been undertaken in two major phases: the first phase spanned from 2000-2011 driven primarily by the expansion of its Liquified Natural Gas ‘LNG’ facilities; followed by the current phase which has seen a shift into the non-hydrocarbon sector and a major infrastructure investment programme designed to diversify the economy. Underpinning this has been the Qatar National Vision 2030, coupled with the preparations for the FIFA World Cup to be hosted by Qatar in 2022.

As per the Qatar State Budget for 2019, new projects worth QAR 48bn are expected to be awarded out of a portfolio of committed projects worth of QAR 421bn. These projects will boost economic growth in the country, especially in non-oil sectors. QAR 33.0bn, equating to 16.0% of total expenditure, has been committed to infrastructure projects focused on developing roads. water, electricity, sewerage networks and other public facilities. Meanwhile, the transportation and communications sector has been allocated QAR 16.4bn, 7.9% of total expenditure.

Through its existing scale and market leading positions, coupled with plans to expand its industrial manufacturing operations further, Aamal is very well positioned to capitalise on the business opportunities in Qatar, further enhancing long-term shareholder value.

An increased focus on industrial manufacturing and related high- growth sectors to capitalise on significant demand arising from wider industrialisation of the Qatari economy.

Strategic pillar #1

Business Strategy

9


Strategic Report

Business Strategy continued

Strategic pillar #2 Strategic pillar #3

In the Qatar State Budget 2019, QAR 22.7bn has been allocated to the healthcare sector, representing 11% of the total expenditure. The budget also focuses on providing the necessary funds for the development of new housing areas, enhancing food security projects, establishing infrastructure and facilities in free zones, special economic zones, and industrial and logistics zones.

Infrastructure projects drive GDP growth, not only through directly increasing the level of investment spend in the economy, but also indirectly through population growth which in turn raises the level of consumption (a ‘multiplier’ effect).

Together, these factors help to expand the size of the non-hydrocarbon sector and contribute to the diversification of the economy. Aamal’s existing businesses are well placed to benefit from this structural transformation, with market leading positions across the economic spectrum.

Aamal maintains its strong commitment to financial and operational progress, supported by a clear corporate vision and strong management team who steer the Company towards achieving its goal. We believe the success and growth of the Company can be attributed to consistency in standards and policies; the ability to closely monitor and control costs allied with our focus on diversification; and the efforts of our supportive local and international partners and our shareholders. Our commitment to corporate governance and business ethics remains at the forefront of everything we do.

Continued growth, diversification and innovation across existing businesses to strengthen market positions and optimise performance.

Continued application of clear and disciplined operational and financial principles underpinning our strategic growth initiatives.

1010


Strategic Report

Chairman’s Statement

On behalf of the Board of Directors, it gives me great pleasure to share with you

Aamal’s Annual Report for the year ending 31 December 2018.

11


Strategic Report

We are proud of our performance in 2018. Although the year saw a decline in revenue and net profit compared to the previous year, our performance was in line with expectations and impacted by already-known, medium-term factors. Our 2018 success demonstrates Aamal’s unwavering abil ity to remain one step ahead of the competition through our ongoing investment, our ability to take advantage of the opportunities offered by the strength of the Qatari economy, and our agility in responding to challenges.

As noted in our quarterly results announcements throughout the year, Aamal continues to feel the impact of the reclassif ication of two business entities within the Industrial Manufacturing segment from subsidiaries to joint ventures, with a consequent change in their accounting presentation. This change will continue to impact our financial results until the first quarter of 2019, at which point the change will have fully annualised.

The year-on-year decline in revenue and net profit was also partly attributable to the Property segment, specifically the continuing re-development of our flagship ‘City Center Doha’ shopping mall. This work continues to progress to schedule and will significantly enhance the longer-term performance of the shopping center, despite the short-term impact.

We continue to pursue a long-term investment approach and remain alert to new value-creating opportunities to support profitable growth for our shareholders. For example, in early 2018 we embarked on three new major industrial projects through our Senyar Industries Qatar Holding subsidiary for the production of copper, aluminium, and drums. These will further strengthen our industrial manufacturing base and facilitate synergies across our operations.

Our Trading and Distribution segment delivered a particularly strong performance across the year led by Ebn Sina Medical, a fully-owned subsidiary and Qatar’s leading provider of pharmaceuticals, hospital supplies and consumer health products. Aamal’s Managed Services segment also saw positive results, particularly in terms of operational efficiency, led by ECCO Gulf and Aamal Services.

It is against this backdrop that I am delighted to announce that Aamal’s Board of Directors has recommended a cash dividend of QAR 0.60 a share, subject to approval at the Annual General Assembly Meeting which is due to take place on 15 April 2019.

The General Assembly will also discuss Aamal’s plans to implement a 10 for 1 stock split in compliance with the stock split directive issued by the Qatar Financial Market Authority (QFMA) to all Qatar Stock Exchange (QSE) listed companies. This market-wide initiative aims to make trading in QSE-listed shares more accessible and attractive to retail investors, and to improve liquidity and trading volumes on the QSE. The stock split will divide each share with a nominal value of QAR 10.0 into 10 shares each with a nominal value of QAR 1.0, thereby increasing Aamal’s total number of shares from 630,000,000 to 6,300,000,000 shares and leaving the total value of Aamal’s paid-up capital unchanged at QAR 6.3 billion.

Owing to the tremendous efforts of Aamal’s management team, we have further enhanced our compliance with the new corporate governance code, ensuring that Aamal’s leadership will continue to drive and deliver long-term excellence. In 2018, we f inalised the restructuring of our Board with key changes including the addition of three independent directors. The breadth and depth of experience they provide positions the Board extremely well to lead the Company forward. We also successfully completed the design for our internal controls processes which I am positive will have a valuable impact on our operations.

Turning to our broader market environment, Aamal remains well-positioned in one of the world’s fastest growing and most successful economies. In 2018, the QSE rebounded significantly and was the second-best major stock market in the world in terms of performance. It saw a surge in foreign net inflows, demonstrating the confidence in the outlook for Qatar amongst foreign investors. Furthermore, as per the Global Entrepreneurship Monitor (GEM) Report, Qatar topped the Global Entrepreneurship Environment Index.

Looking ahead, I remain confident in Aamal’s future, with the Company’s resilient and diversified business model supported by a clearly defined long-term strategy helping us to achieve sustainable growth for our shareholders. We will continue to explore new opportunities, using our first mover advantage to introduce innovative projects and supporting our beloved country in achieving its National Vision under the wise leadership of the Emir, Sheikh Tamim bin Hamad Al Thani, and the Government of Qatar.

Finally, I would like to take this opportunity to thank our esteemed Board of Directors, respected partners, valued shareholders, management, staff and all other stakeholders across the Aamal Group for their tremendous work, commitment and passion throughout 2018. This has allowed Aamal to successfully grow and develop and I have huge confidence in our people to continue delivering on this trajectory through 2019.

Faisal Bin Qassim Al ThaniChairman

Chairman’s Statement continued

12


Strategic Report

Market Review by Segment

Industrial Manufacturing Segment (non-hydrocarbon sector)A significant advantage of Qatar is the presence of competitively priced raw materials including secure energy supplies and the availability of vast, open land suitable for establishing industrial facilities.

The Qatari Government considers industrial development to be integral to its plan to diversify the economy through leveraging Qatar’s huge natural gas reserves and is strongly supportive of local investment in the manufacturing sector. In addition to the Government’s plan to invest in several downstream industries related to oil and gas sector, the Government is encouraging private companies to invest in setting up local manufacturing and assembly facilities, spurred on by its large-scale infrastructure development.

The achievement of self-sufficiency in food, dairy and agriculture products has been given greater emphasis by authorities, encouraging many large-scale investments in these product segments. Expansion of Hamad Airport, road networks, buildings and infrastructure have been identified by authorities as potential investment opportunities in the immediate future for private enterprises.

Added to that is the full-scale operation of the new Hamad Seaport which has positively impacted Qatar`s growth as a regional trading hub for various industrial activities in the Middle East. Several new manufacturing companies across several sectors – consumables and non-consumables – are also coming on-stream. By establishing new trading routes and trading partnerships, the economy has been able to maintain its impressive growth.

Trading and Distribution Segment This segment has been one of the strongest and fastest growing segments in Qatar for several decades. Qatar maintains healthy trade relations with the major economies in the region. For oil and gas products, the nation has diversified its export partnerships with new and emerging markets. Qatar’s imports are more diverse and include automobiles, electronic goods, pharmaceuticals, medical equipment, building interiors and furniture, infrastructural goods, garments, food and agricultural produce.

Opportunities for business in the trading sector have continued to grow driven by key projects including the FIFA 2022 event, Doha Metro, infrastructure and building projects, as well as the ever-increasing population in Qatar. Furthermore, the core sectors emphasised by the Government as per its National Vision 2030, such as healthcare, education, technology and social welfare are driving the need for several high-value products that are not manufactured in Qatar at present.

The development of the country’s infrastructure together with the government’s ambition and devotion to develop the industrial sector will contribute to placing Qatar in the foreground of other trading hubs in the region.


Trading and Distribution

1313

Aamal Company Q.P.S.C. Annual Report 2018Aamal Company Q.P.S.C. Annual Report 2018

Strategic Report

Market Review by Segment continued

Property Segment Qatar is experiencing a phase of rapid growth in the retail industry with several large shopping malls launched already covering a combined area of more than 1.4 million m2, and an additional nine new malls expected to open during 2019-20. The location and accessibility of shopping malls remain critical to attracting healthy footfall. Qatar’s real estate market witnessed an additional supply of office space of over 720,000 m2, bringing the total supply of office space to 4.61 million m2 by the end of 2018.

The growth in the supply of office space is expected to continue in 2019, with approximately 740,000 (0.74 million) m2 expected to be created, according to the latest market review by Valastro, a leading consulting firm.

As a result of the abundant supply in the real estate market, rental rates fell marginally in some parts of Doha, while some organizations have implemented measures to control costs, commercial rents at major locations remained broadly stable.

Managed Services Segment The Services segment in Qatar is expected to continue on its strong growth trajectory, driven largely by the Government’s desire to improve the quality of key services. In accordance with the Qatar National Vision 2030, healthcare, education, tourism and software/technology related sectors are being given greater strategic attention. It is against this backdrop that the Services sector has defied the slump in global energy prices and will continue to contribute positively to Qatar’s GDP over the coming years.

The Government’s commitment to develop Qatar into a major tourist and entertainment destination in the region, by launching new tourist attractions and theme parks, is expected to boost visitors from across the globe. Demand in this sector is expected to grow for several years supported by Qatar’s hosting of several global sporting events in Doha, industry trade fairs, fashion shows, entertainment events and the continued support from the Government (including the easing of entry visa requirements for many nationalities and improved air connectivity to new destinations by Qatar Airways).

Improving the quality of education and healthcare in Qatar is a high priority. Government services are moving towards technology-based, paperless administration, generating the need for local knowledge solutions. These activities will act as catalysts increasing the demand for soft solutions and related supporting services.

Managed Services

Property

14


Strategic Report

CEO and Managing Director’s Report

Throughout the year, the Aamal businesses have remained

assiduously focused on strengthening their market

positions while remaining one step ahead of the competition through ongoing investments

15


Strategic Report

Throughout the year, the Aamal businesses have remained assiduously focused on strengthening their market positions while remaining one step ahead of the competition through ongoing investment. These efforts have yielded positive results, as demonstrated by Aamal’s ability to withstand challenging external pressures such as heightened competition.

In our Trading and Distribution segment, growth of 10% and 8% in revenues and net profit, respectively, is testament to our success in establishing new supply chain channels to overcome the issues associated with the ongoing Qatar border blockade, as well as launching strategic partnerships with leading international companies to tackle the fierce market competition we face.

Ebn Sina Medical, the largest business in the Trading and Distribution segment, had a particularly strong year. In the face of the Qatar border blockade, it established partnerships with several new suppliers and established a number of strategic partnerships, including a partnership with Amryt Pharmaceuticals enabling us to deliver vital medication for treating rare, life-threatening diseases, Ebn Sina Pharmacy also successfully opened a new pharmacy in Ras Abu Aboud and installed the first ever robot pharmacy in Qatar at City Center Doha.

Meanwhile, Aamal Trading, the exclusive distributor in Qatar of Bridgestone tyres and a non-exclusive distributor of Total Lubricants, faced heightened competition in 2018 due to low-priced alternative products being made available in the market and dealers importing their own brands. In seeking new ways to remain competitive, discussions with Bridgestone are ongoing to expand brand offerings to include a wider variety with competitive prices. This reflects Aamal’s commitment to further diversify and improve its service offering in line with its objective to be the leading specialist partner-of-choice across the full range of vehicle services.

The fall in performance in our Property segment is in line with expectations. This decline is largely attributable to the ongoing upgrade and redevelopment work on Aamal’s flagship City Center shopping mall which is progressing to schedule. Despite declining rents in the retail sector, Aamal Real Estate has focused its efforts on the residential sector, successfully expanding its residential portfolio through a number of acquisitions and successfully completing the construction of a 63-apartment residential building.

As highlighted in Aamal’s quarterly results announcements, the change in accounting treatment in the Industrial Manufacturing segment continues to distort the reality of this segment’s performance. That aside, the three new industrial projects being undertaken by Senyar Industries Qatar Holding for the production of copper, drums and aluminium are each progressing in line with their respective schedules. These will increase self-sufficiency among the subsidiaries of Senyar Industry Qatar Holding and will also help to reduce production costs for Doha Cables which currently faces soaring costs due to the importation of raw material and empty drums.

It has been a significant year for Aamal Readymix, the largest subsidiary of the Industrial Manufacturing segment, which completed the installation and commissioning of five production plants at the recently renovated Bu-Qalila site. Furthermore, as a result of the relocation of the Lusail Batching Plant, Aamal Readymix has increased its overall raw material storage capacity by 50,000 tonnes. This significant increase in capacity leaves Aamal Readymix well-positioned to support major projects in adjacent areas.

In our Managed Services segment, while revenues increased only marginally, the 17.1% increase in net profit is largely attributable to a detailed expenditure review undertaken in early 2018 which led to the successful renegotiation of contract rates with suppliers to ensure costs are in line with market values.

Looking ahead to 2019, we adopt an optimistic outlook as Qatar’s economy continues to perform well, showing resilience and strength due to the successful implementation of the Government’s strategy to drive economic diversification under the wise guidance of His Highness, The Emir Sheikh Tamim bin Hamad Al Thani. Supported by Qatar’s economic self-sufficiency and expanding its international trading relationships, Aamal will continue to leverage its strong f inancial position and pursue a successful diversification strategy, building on the Company’s leading positions across a number of different sectors and selectively expanding so as to create long-term shareholder value.

Mohammed Bin Faisal Al ThaniCEO and Managing Director

CEO and Managing Director’s Report continued

16


Strategic Report

Why invest in Aamal Company?Investment Rationale1. Operating in an attractive growing market

– Qatar is one of the world’s fastest growing and most successful economies

– Aamal has strong market positions in key high-growth sectors – Significant growth opportunities as a result of:

– The Qatar National Vision 2030 – Industrial development is an integral par t of the

Government’s plan to diversify the economy – QAR 33 billion has been earmarked for new projects,

particularly in infrastructure – Aamal is very well positioned to capitalise on this

– Government investment in downstream industries related to oil and gas

– Qatar’s award of the 2022 FIFA World Cup

2. Strength through diversity– Diversified for balanced exposure across the Qatari economy – Operations across 26 active business units– Market leading positions in key growth sectors:

– Industrial Manufacturing – Retail – Real Estate – Managed Services – Medical equipment and pharmaceuticals

– Each subsidiary managed as a standalone entity, optimizing management’s operational focus and transparency

3. Financial strength– Strongly capitalised (QAR 8.0bn (US$ 2.2bn) of shareholders’

funds, end of 2018)– Low financial gearing – just 0.01% at end of 2018– Net cash position, little to no corporate indebtedness– Readily available access to debt capital markets, which in

addition to strong cash flow generation, provides significant scope for future growth in terms of financing

– Strong, long-term supportive backing from Al Faisal Holding Company and Sheikh Faisal Bin Qassim Al Thani – Aamal’s major shareholders

– Average increase in underlying profit margins of 11.1% ( before fair value gains on investment properties) over the twelve years to the end of 2018.

– One of the highest dividend yield payers amongst QSE listed companies

4. Experienced, proven senior management team– Proven capital allocation track record driving profit growth and

value creation through a clear focus on returns on capital and capital discipline

– Highly effective corporate decision-making with short lines of communication with operational management – evidenced by Aamal’s agility in establishing alternative supply chains in the face of the blockade on Qatar

– Proven track record of successfully partnering with leading international companies to build incremental revenue streams by meeting growing domestic demand in new markets and sectors

– Talented and motivated managers with significant experience and strong customer relationships in their respective areas

Investment Rationale

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Strategic Report

Sustainability Framework and ESG Disclosures

Aamal Q.P.S.C. (“Aamal” or “the Company”) was among the first listed companies in Qatar to address the Qatar Stock Exchange (QSE) ‘Guidance on ESG Reporting’, encouraging many of the listed companies to voluntarily report on a set of Environmental, Social, and Governance (ESG) performance indicators. In our second year of reporting we extended our coverage from six companies to a total of ten, aiming to gradually expand coverage to include results from all our subsidiary companies over the coming years.

The companies included in our aggregated disclosure for 2018 are those who reported last year (Aamal Q.P.S.C., Doha Cables, Aamal Readymix, Ebn Sina Medical, Aamal Medical and City Center Doha) plus an additional four new companies, being Aamal Cement Industries, Ci-San Trading, Ebn Sina Pharmacy and Foot Care Center. Together, they represent over 65% of our revenues, 75% of net profit, and 49% of our employees. Unless otherwise stated, the numbers presented in this ESG section cover these nine subsidiary companies and Aamal Q.P.S.C. Where the information presented aligns with QSE’s Guidance on ESG Reporting, we specifically state the relevant QSE indicator.

Our Sustainability FrameworkThe Sustainability Framework of Aamal reflects the four elements of sustainability – Business Ethics and Transparency, Workplace, Community and Environment – that support our corporate strategies for value creation in each of our operating divisions, while also considering alignment to the four pillars of the Qatar National Vision 2030.

Each element of our sustainability framework comprises of sub-areas that provide focal themes for developing specific KPIs that generate financial value for our business, as well as economic and social value for our key stakeholders. Sustainability management helps us to better understand our stakeholders’ needs, identif y new market opportunities, and drive innovation while also saving costs and enhancing our competitiveness.

The next few pages will provide an overview of our activities in each of these areas throughout the year of 2018.

Business Ethics and TransparencyAt Aamal, we believe that strong corporate governance is a crucial factor to achieve high performance and success across all our subsidiary companies, as well as to maintain investor trust.

Our Governance Report covers the procedures followed by the Company to ensure good governance practices. Our Board Charter covers critical governance items including the role of the Board of Directors and its three committees, audit and internal control mechanisms, remuneration, and shareholders’ rights. Aamal’s governance framework abides with the provisions of the Governance Code for Companies and Legal Entities Listed in the Main Market No. (5) of 2016 (the “Code”) issued by Qatar Financial Markets Authority (“QFMA” or the “Authority”), and the Commercial Companies Law No. (11) of 2015 (the “Companies Law”).

Business Ethics and

Transparency

Ethics

Transparency

Accountability

Environment

Greener Products

Energy

Emissions

Water

Waste

Community

Community work

Procurement

Youth

Workplace

Safety

Health

Training

Diversity

Women



Property Managed Services

Value Creation

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Strategic Report

Sustainability Framework and ESG Disclosures continued

Business Ethics and Transparency continuedAll our subsidiary companies and their employees abide by a Code of Conduct (QSE#30). This also extends to our suppliers – setting our high standards and expectations for business integrity throughout our supply chain (QSE#31). We do not tolerate any form of bribery or corruption in any of our subsidiary companies. Our anti-corruption policy includes clear anti-corruption rules and guidelines that are strongly reinforced through awareness raising and training programmes for key managers and staff (QSE#32).

Anti-discriminationOur Company’s policy prohibits discrimination and harassment of any kind, and informs employees of the encouraged actions to be taken in case of witnessing or experiencing any discrimination or harassment behaviours. Any concerns will be dealt with promptly and confidentially, ensuring that employees will not be victimised or disadvantaged if they make a complaint. Our grievance procedure is available to all employees. It is a formal channel we use to investigate and resolve any sort of grievances against the Company or our employees. Any employee who discriminates, victimises or harasses may be subject to disciplinary action, including dismissal.

Second Conference on Corporate Governance

In early October 2018, Aamal Q.P.S.C. participated in the Second Conference on Corporate Governance, organised under the sponsorship of Qatar Financial Markets Authority. Aamal’s participation in this event is a result of our strong commitment to the highest standards of corporate governance. The conference included a number of sessions relating to important corporate governance topics, such as “Sustainability and Governance”, “Investor Rights” as well as “Scope of Implementation” at which Ms. Arwa Hamdieh (Board Secretary) was a speaker.

Human rights & traffickingAamal respects the human rights of all our employees, suppliers, contractors and clients, as articulated in the Universal Declaration of Human Rights (QSE#16). It is mandatory that this commitment is supported and reflected by our stakeholders and that the adoption of human rights guidelines and principles is embedded into all our business activities (QSE#18). During our employee orientation information sessions, every new employee receives training on human rights, employee rights, and other related Company policies.

We also have zero tolerance for human trafficking and all other related activities that are against basic human rights. We believe that all employees have the responsibility to contribute to combating human trafficking and may report, without fear of retaliation, any sort of activities inconsistent with our policy by directly contacting our Employee Reporting hotline or email and/or the Global Human Trafficking Hotline.

In 2018, there were no outstanding incidents or grievances related to any of the above among our reporting subsidiary companies (QSE#17).

Further governance-related information that is recommended by the QSE Guidance on ESG Reporting can be found in the Governance Section of this report.

Governance aspect 2017 2018 QSE KPI # QNV Pillar

Percentage of Board seats taken by women

16% 11% 23 Social

Percentage of Board seats taken by independent directors

0% 33% 24 Social

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Workplace1,138 full time employees work for Aamal and the nine subsidiary companies engaged in this ESG disclosure exercise, representing 49% of Aamal’s total workforce (QSE# 10). Their health and safety are of utmost importance, and we are dedicated to ensuring that our employees are not just motivated to do the work, but can also conduct their work in a safe and healthy environment.

To ensure workplace safety, our subsidiary companies and contractors must comply with our occupational health policy and safety procedures, particularly our industrial manufacturing companies. This is why our subsidiary companies Aamal Cement Industries, Aamal Readymix and Doha Cables are OHSAS 18001:2007 certif ied (QSE#14). Their employees also received more than 2,000 hours of training on HSE related matters in 2018. Thanks to these efforts, we did not encounter any fatal incidents across the ten companies included in the 2018 disclosure. The overall recordable incident rate is also comparatively low with only four1 incidents at our subsidiary companies (QSE#15).

Overall, we consider training and development to be an important factor in contributing not only to employee engagement but also to the overall success of our business. To provide our employees with the opportunity to develop their knowledge and skills and to further advance within their companies, we developed a comprehensive Training & Development Program Policy. The programme is mainly based on the results of the annual Performance Management System; particularly targeting the development needs identified. As part of the programme, we encourage our employees to continuously acquire new qualifications, specific skills and enhance their competences. They can choose from a number of training courses, workshops, on the job training, self-study programmes, seminars and information technology trainings. In 2018, each employee received 382 hours of training, on average, a threefold increase on last year (QSE#13).

University Volunteer Youth Forum 2018

Aamal Q.P.S.C. sponsored the University Volunteer Youth Forum 2018, which was organised by Qatar University in October 2018. This forum was organised under the patronage of H.E. the Minister of Culture and Sports, aiming to bring together participants and volunteers from the region to promote volunteerism and community service.

Aamal is also committed to engaging and motivating its employees and celebrating their successes. Hence, every year Aamal awards an ‘Employee of the Year’ for employees in the non-management and non-supervisory positions. The award is presented to the employee who has made an exceptional contribution to the Company in terms of job excellence, customer satisfaction, business growth, quality and/or continuous improvement.

Qatarisation is a strategic initiative by the Government of Qatar to provide employment for its citizens in the private and public sectors and part of the Qatar National Vision 2030. Aamal supports Qatarisation (QSE# 20). It aims to develop skilled, educated, and competent Qataris to assist the continuous development of a skilled Qatari workforce. Our programmes ensure that Qataris are identified and appropriately trained and developed in line with Aamal’s strategic objectives.

Social aspect 2017 2018QSE

KPI #QNV Pillar

Number of full time employees (#) 1,000 1,138 10 Human

Percentage of women in the workforce (%)

5.6% 6.3% 19 Social

Percentage of Qatari nationals in the workforce (%)

0.0% 0.0% 20 Human

Percentage of employees turnover (%)

4.1% 8.3% 12 Human

Hours of training per employee per year (#)

11 38 13 Human

Total Number of Employees and Contractors Recordable Injuries (#)

4 4 15 Human

Total amount of employees wages and benefits (QAR)

57,548,589 71,796,707 11 Human

1 Excluding Ci-San Trading2 Excluding Ci-San Trading

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Strategic Report


Community and SocietyAt Aamal, we seek to make a positive contribution and impact on our local communities and society in general, hence most of our subsidiary companies are engaged in community activities. In 2018, Aamal sponsored various events, including the second Shareholding Company’s CSR Conference, the second Business Continuity and Resilience Conference, Gulf English School’s Career Fair, QSE’s Investor Relations Conference as well as the Embassy of Belgium’s King’s Day and accompanying events. Total community investments amounted to QAR 95,000 (QSE# 21) in 2018(3).

In the area of education, individual subsidiary companies provided several opportunities for learning and development, including:

– Doha Cables Academy provides training for University students and engineers

– Ebn Sina Medical continues to provide education through the adoption of two programmes:

– support of pharmacy students at the University of Qatar and the College of the North Atlantic, through the provision of collaborative training work experience opportunities within the Ebn Sina Pharmacy chain

– support of the scholarship programme for the Bachelor’s, Master’s and PhD Pharmacy students at Qatar University

Besides sponsoring events, four of our companies’ very purpose is people’s health – Ebn Sina Medical, Aamal Medical, Foot Care Center and Ebn Sina Pharmacy. Their business is the timely provision of pharmaceutical supplies and medical equipment to Qatar’s medical facilities, pharmacies, and ultimately the people of Qatar. In 2018, Aamal Medical signed an agreement with the leading Turkish healthcare firm Simeks, to supply medical equipment with advanced medical technologies. Simeks focuses on the optimisation of management processing of medication and medical supplies, with the objective of containing major costs in hospitals and helping to prevent medical errors and thereby maximise patient safety.

To ensure overall product quality and safety, and ultimately customer health, Ebn Sina Medical performs regular internal and external audits, provides training for employees, and follows the risk management procedures of the GDP guidelines4. Ebn Sina Medical has been undergoing the GDP certif ication progress since 2018, with the expectation of receiving the certification in 2019.

Aamal Medical has similar processes in place, following ISO 9001:2015 Quality Management System. All products distributed by Aamal Medical hold CE markings or FDA approvals, and factories where the products are obtained from hold ISO 13485 certifications. In addition, Aamal Medical has a thorough customer satisfaction process in place, including regular customer satisfaction surveys. In 2018, only 1 customer complaint was recorded and subsequently addressed, a mere 0.06% of total transactions.

Last but not least, Aamal directly contributes to the local economy through the wages and benefits we pay our employees as well as through our supplier choices. In 2018, our total monetary contribution to our employees amounted to 71.8m QAR5 (QSE# 11). Aamal also undertook initiative to encourage local procurement, 94%6 of our procurement is now sourced from local suppliers (QSE# 22).

EnvironmentAamal is committed to embedding environmental principles and practices in all aspects of our operations, to protect the environment and minimise our environmental footprint and waste through sound management of natural resources including water, energy, materials, and biodiversity (QSE#3-9). To comply with all environmental regulations and guidelines by the State of Qatar, three of our reporting industrial manufacturing companies, (Doha Cables, Aamal ReadyMix, and Aamal Cement Industries), follow ISO 14001. Aamal also maintains internal Environmental Impact Registers to routinely evaluate impact on the environment (QSE#1). We did not incur environment-related fines incurred by any of our operations in 2018 (QSE#2).

In 2018, a number of environmental improvement initiatives were undertaken by our subsidiary companies. Of our ten reporting companies, those with the biggest environmental impact, particularly around energy usage, are City Center Doha, Aamal ReadyMix, Doha Cables, and Aamal Cement Industries.

City Center Doha is continuously working on reducing its energy consumption, and was able to save more than 6% of electricity, 7% of water, and 3% of natural gas compared to last year. Several initiatives in that respect have been completed while others are currently being or planned for:

– switch off lighting, chillers and air handling units (AHU’s) outside of business hours to reduce energy consumption (implemented)

– continuously monitor the 37 carrier chillers which enable City Center Doha to meet the required temperature set point with as few chillers running as possible to save on energy consumption (implemented)

– replace 360 emergency light fittings (Halogen) with LED, in an annual electricity cost saving of QAR 28.740 (implemented)

– sign a contract with Elite Paper Recycling to recycle all waste cardboard cartons produced at City Center Doha, with implementation of this recycling initiative being underway (in progress)

– investigate the possibility of recycling plastic and aluminium (in progress)

– replace 1,400 old fluorescent light fittings in the ground floor car park with 900 LED’s, which will achieve the same lighting levels yet reduce annual energy costs by approximately QAR 200,000 p.a. (planned for 2019)

– constructing a new baulk-diesel-storage tank with pumps and pipework to automatically keep the generator day-tanks full at all times rather than refilling them manually. This will safeguard business continuity whilst meeting all the relevant regulations (planned for 2019)

– replace underground LPG tanks (planned for 2019)

Over the past year, Aamal ReadyMix’s total energy consumption has increased by 21% due to the installation of a new water chiller and a new ice plant at the industrial area factory. To tackle rising energy consumption, Aamal ReadyMix is working on the installation of solar power units at the new factory in Bu-Qalila, to power factory lighting, the weighbridge system, the CCTV system, the security cabin and office PC’s.

(3)Covers Aamal Q.P.S.C. and Ebn Sina Medical only(4)European Union Guidelines on Good Storage and Distribution Practices of medicinal products for human use(5)Excluding Doha Cables (6)Excluding Doha Cables & Aamal Medical

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Strategic Report


Aamal ReadyMix also installed two recycling plants at its industrial area and Bu-Qalila factory locations to process and segregate all solid waste generated during its operations. Furthermore, a water reclaim system is in place to utilise the waste-water of the process of vehicle washing.

One great success during 2018 was achieving a dust-free setup at Aamal ReadyMix’s industrial factory location. All dust-producing components have been sealed and new concrete flooring completed, to control dust. Regular dust monitoring tests are undertaken by approved service provider,in line with the directive of the Ministry of Environment to ensure compliance with the environmental standard.

Environmental aspect 2017 2018 QSE KPI # QNV Pillar

Total amount of energy usage in MWh 135,024 146,671 3 Environment

Energy Intensity (kWh/m3) 171 172 4 Environment

Total greenhouse gas emissions (tonnes) 56,763 60,609 5 Environment

Primary source of energy used by the Company Electricity Electricity 6 Environment

Percentage of energy used from renewable sources 0.0% 0.0% 7 Environment

Total water consumption (m3) 1,571,176 1,477,919 8 Environment

Total waste recycled or reused (tonnes) 11,628 16,173 9 Environment

Total waste water generated (m3) 17,368 19,839 9 Environment

Total non-hazardous waste produced (tonnes) 36,156 37,884 9 Environment

Total amount of waste water re-used (m3) 5,093 6,651 9 Environment

Ebn Sina Medical is working on a process to optimise vehicles trips as it has experienced a 41% increase in petrol consumption from 2017 to 2018, due to an increase in business and consequently of the deliveries required. The new system shall help decrease the fuel consumption and ultimately CO

2 emissions to preserve the environment.

Additionally, Ebn Sina Medical installed environmentally-friendly light bulbs across its facilities to reduce the electricity consumption.

Environmentally-friendly procurement is another area where we see a lot of potential for positive impact. Aamal continues to work with suppliers that provide products and services that have a lower (wherever possible) environmental impact. While the Company does not yet have a proactive policy to attract suppliers with higher environmental eff iciency ratio, Aamal strives to give priority to suppliers that can demonstrate that.

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Strategic Report

Appendix 1: ESG Reporting Against Qatar Stock Exchange Guidance for ESG Reporting

QSE KPI # ESG Key Performance Indicators Measurement annual, unless indicated otherwise QNV Pillar Page # / Comment

Environmental

1 Environmental Policy Does the company publish and follow an environmental policy? Environment Yes

2 Environmental Impacts Any legal or regulatory responsibility for an environmental impact? Environment No

3 Energy Consumption Total amount of energy usage in MWh or GJ Environment Page 21

4 Energy Intensity Amount of energy used per m3 of space, and per FTE Environment Page 21

5 Carbon/GHG Emissions Total amount of Carbon and Green House Gas emissions in metric tonnes Environment Page 21

6 Primary Energy Source Specify the primary source of energy used by the company Environment Electricity

7 Renewable Energy Intensity Specify the percentage of energy used that is generated from renewable sources Environment Page 21

8 Water Management Total amount of water consumption, and details in respect of recycling if any, in m3 Environment Page 21

9 Waste Management Total amount of waste generated, recycled or reclaimed, by type and weight Environment Page 21

Social

10 Full Time Employees Number of full time employees Human Page 19

11 Employee Benefits Total amount of employee wages and benefits Human Page 19

12 Employee Turnover Rate Percentage of employee turnover Human Page 19

13 Employee Training Hours Total number of hours of training for employees divided by the number of employees

Human Page 19

14 Health Does the company publish and follow a policy for occupational and global health issues?

Human Yes

15 Injury Rate Total number of injuries and fatal accidents relative to the number of FTEs Human Page 19

16 Human Rights Policy Disclosure and adherence to a Human Rights Policy Social Page 18

17 Human Rights Violations Number of grievances about human rights issues filed, addressed and resolved Social Page 18

18 Child & Forced Labour Does the company prohibit the use of child or forced labour throughout the supply chain?

Social Yes

19 Women in the Workforce Percentage of women in the workforce Social Page 19

20 Qatarisation Percentage of Qatari nationals in the workforce Human Page 19

21 Community Work Number of hours spent, and/or other community investments made as a percentage of pretax profit

Social Page 20

22 Local Procurement Percentage of total procurement from local suppliers Economic Page 20

Governance

23 Board – Diversity Percentage of Board seats taken by women Social Page 18

24 Board – Independence Percentage of Board seats taken by independent directors Social Page 18

25 Board – Separation of Powers Specify whether the CEO is allowed to sit on the Board, act as the Chairman, or lead committees

Social Yes

26 Voting Results Disclosure of the voting results of the latest AGM Social Announced on QSE’s website

27 CEO Pay Ratio Ratio of CEO salary and bonus against the median FTE salary and bonus Social 7:1

28 Gender Pay Ratio Ratio of median male salary to median female salary Social 2:1

29 Incentivised Pay Specify the links between (executive) remuneration and performance targets Economic N/A

30 Ethics Code of Conduct Does the company publish and follow an Ethics Code of Conduct? Social Yes

31 Supplier Code of Conduct Does the company publish and follow a Supplier Code of Conduct? Social Yes

32 Bribery/Anti-Corruption Code Does the company publish and follow a Bribery/Anti-Corruption Code? Social Yes

General ESG Reporting

33 Sustainable Reporting Frameworks

Does the company publish a GRI, CDP, SASB, IIRC or UNGC report? Yes/No Social No

34 External Assurance Are the company’s ESG disclosures assured by an independent third party? Yes/ No

Social No


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Strategic Report

Appendix 2: Data coverageThe below table provides an overview of reporting from all ten companies. Note: column for Ebn Sina Medical includes data from Ebn Sina Pharmacy and Foot Care Center

Key Performance IndicatorDoha

CablesAamal

Ready mixEbn Sina

MedicalAamal

Medical

City Center

DohaAamal

Q.P.S.C.

Aamal Cement

IndustriesCi-San

Trading

ENVIRONMENT

Does the company publish and follow an environmental policy? yes yes no no no no yes noAny legal or regulatory responsibility for an environmental impact? F F F F P7 P8 F NTotal amount of energy usage in MWh F F F N F P8 F P8Energy Intensity (MWh/m3) F F F N N P8 F P8Total amount of Green House Gas emissions (tonnes of CO2eq) F F F N F P8 F P8Primary source of energy used by the company F F F N F P8 F NSpecify the percentage of energy used from renewable sources P8 F F F N P7 N NTotal amount of water consumption (m3) F F F N F P8 F NTotal amount of waste recycled or reused (tonnes) P7 F F F N P7 N NTotal amount of waste water generated (m3) F F N P7 N P7 F NTotal amount of hon-hazardous waste produced (tonnes) F F F F F N F NTotal amount of waste water re-used (m3) F F N P7 F P7 F N

SOCIAL

Number of full time employees F F F F F F P8 P8Total amount of employee wages and benefits, (in QAR) N F F F F F F P8Percentage of employee turnover F P8 F F F F N P8Hours of training per employee per year F P8 F F F F P8 NDoes the company follow a policy for occupational health? yes yes no no no no yes noNumber of Employees and Contractors with Recordable Injuries F F F F F F F NDisclosure and adherence to a Human Rights Policy yes yes yes yes yes yes yes yesNumber of grievances about human rights issues filed P7 F F F F F F P8Does the company prohibit the use of child or forced labour

by suppliers? yes yes yes yes yes yes yes yesPercentage of women in the workforce (%) F F F F F F P8 NPercentage of Qatari nationals in the workforce (%) F F F F F F P8 NCommunity investments and initiatives (QAR) N N F P7 N P8 N NAmount of total procurement from local suppliers (%) N F F P7 F F F P8

GOVERNANCE

Percentage of Board seats taken by women N/A N/A N/A N/A N/A F N/A N/APercentage of Board seats taken by independent directors N/A N/A N/A N/A N/A F N/A N/AIs the CEO allowed to sit on the Board? On Committees? N/A N/A N/A N/A N/A F N/A N/ADisclosure of the voting results of the latest AGM N/A N/A N/A N/A N/A F N/A N/ARatio of CEO salary against the median FTE salary N/A N/A N/A N/A N/A F N/A N/ARatio of median male salary to median female salary N/A N/A N/A N/A N/A F N/A N/ASpecify the links between (executive) remuneration and

performance N/A N/A N/A N/A N/A F N/A N/ADoes the company publish and follow an Ethics Code of Conduct? yes yes yes yes yes yes yes yesDoes the company publish and follow a Supplier Code of Conduct? yes yes yes yes yes yes yes yesDoes the company publish and follow a Bribery/Anti-Corruption Code? yes yes yes yes yes yes yes yesDoes the company publish a GRI, CDP, SASB, IIRC or UNGC report? no no no no no no no noAre the company’s ESG disclosures assured by an independent

3rd party? no no no no no no no no

Legend:N/A Not applicableF Full reporting for both years (2017 & 2018)P7 Partial reporting – information for 2017 onlyP8 Partial reporting – information for 2018 onlyN No reporting on that KPI


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Strategic Report

REVENUE

QAR m 2018 2017 Change %

Industrial Manufacturing 230.5 582.2 (60.4%)Trading and Distribution 696.4 633.3 9.9%Property 295.4 320.9 (7.9%)Managed Services 96.7 95.3 1.5%less: inter-divisional revenue 32.4 27.6 17.4%

TOTAL 1,286.6 1,604.2 (19.8%)

NET PROFIT


Industrial Manufacturing 101.5 167.8 (39.5%)Trading and Distribution 125.3 116.2 7.8%Property1 241.1 268.1 (10.1%)Fair value gains on investment properties 0.0 0.0 –Managed Services 8.2 7.0 17.1%less: Head Office costs 28.4 36.1 (21.3%)

TOTAL 447.6 523.1 (14.4%)

1 Before fair value gains on investment properties

Operational Review – by Segment

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Strategic Report



Revenue 230.5 582.2 (60.4%)Net profit – fully consolidated activities 6.9 71.2 (90.3%)Net underlying profit margin % 3.0% 12.2% (9.2) pptsShare of net profit of associates and joint ventures accounted for using the equity method 94.6 96.6 (2.1%)

Total net profit 101.5 167.8 (39.5%)

In practice, this means that the accounts of these companies are no longer fully consolidated on a line-by-line basis, but instead through the equity method. As such, the revenues of these two entities are no longer included in Aamal’s total revenues, and Aamal’s share of their net profits is included as a single line item called “Share of net profit of associates and joint ventures accounted for using the equity method” on the Statement of Comprehensive Income. Consequently, some year-on-year comparatives currently do not reflect the true reality of Aamal’s performance. This change will fully annualise in the first quarter of 2019.

Aside from this, 2018 was undoubtedly a year of heightened competition and increased market sensitivity towards price. To mitigate these factors and maintain our competitive advantage, the Industrial Manufacturing segment has identif ied a number of new opportunities to develop incremental revenue streams and profitability. At the start of 2018, Senyar Industries Qatar Holding announced three major new industrial projects for the production of aluminium, copper and drums, driving self-sufficiency among the subsidiaries of Senyar Industries Qatar Holding. The new factories will be the first of their kind in Qatar and represent an important development in supporting Qatar’s industrial transformation and fulfilling the needs of the Qatari market. Furthermore, the operational benefits of these projects will help to reduce production costs for Doha Cables, our cable manufacturing business, which currently faces increasing import costs of copper and empty drums.

The decline in revenue and net profit for Aamal Readymix, the largest subsidiary of the Industrial Manufacturing segment, is attributable to the increased costs associated with rent, fuel, raw materials, repair and maintenance, and depreciation. Aamal Readymix successfully completed the relocation of the Lusail Batching Plant to the new Manateq Industrial zone in Mazroua and finalised the installation and commissioning of five production plants at the recently renovated Bu-Qalila site. This has significantly enhanced production facilities which now boast state-of-the-art equipment and have increased Aamal Readymix’s raw material storage capacity by 50,000 tonnes. Consequently, Aamal Readymix is now well-positioned to support major projects in adjacent areas.

Aamal Industrial Manufacturing operations currently include:1. Senyar Industries Qatar Holding: production and distribution of

electric cables, equipment and tools, as well as the distribution of electromechanical equipment

2. Aamal Readymix: production of high quality ready-mixed concrete3. Aamal Cement Industries: production of interlocking paving

stones, concrete blocks and tiles4. Ci-San Trading: importation and supply of high-quality gabbro

aggregates through Gulf Rocks; and their shipping through Aamal Maritime Transportation Services

5. Advanced Pipes and Casts Company: manufacturer of pipes6. Frijns Structural Steel Middle East: produces steel for the

petrochemical and process industries, including all associated engineering, production, anti-corrosion, construction and assembly work

7. Innovative Lighting Company: currently in liquidation

As explained in our results announcements throughout 2018, the decline in revenue and net profit of 60.4% and 39.5%, respectively, is largely attributable to a change in accounting treatment for Senyar Industries and Advanced Pipes and Casts Company, both of which are now accounted for as joint ventures having both previously been consolidated as subsidiaries.

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Strategic Report

Industrial Manufacturing continued

1. Senyar Industries Qatar Holding (‘Senyar’)

A 50:50 joint venture between Aamal and El Sewedy Electric Company, a leading producer of integrated cables and electrical products (such as transformers, tools and energy and water measurement and management). Senyar operations include: a- Senyar Factory for Drums: established in 2018, and allocated in

Mesasied and work is in progressb- Senyar for Producing Copper Rod: established in 2018, waiting for land

allocationc- Senyar for Producing Aluminum Rod:established in 2018, waiting for

land allocationd- El Sewdy Cables Qatare- Doha Cables

El Sewedy Cables Qatar

El Sewedy Cables Qatar commenced operations in 2006, specialising in the distribution of electromechanical equipment and cables for Doha Cables and third-party manufacturers. A 49% stake (with 55% share of profits/losses) was acquired by Senyar from El Sewedy Electric Company in January 2010. During 2016, Senyar acquired a further 24.4% of shares and the remaining 26.6% with unaffiliated third parties. Effective ownership by Aamal in El Sewedy Cables Qatar is 38.3%.

Doha Cables

The first and largest cables manufacturing facility in Qatar, Doha Cables commenced operations in May 2010 specialising in the manufacture of power cables, special cables, winding wires and cable accessories. Senyar has an 85% interest in Doha Cables, with El Sewedy Cables Qatar owning a 12.5% interest (of which Senyar owns 76.6%), and an unaffiliated third-party the remaining 2.5%. Effective ownership held by Aamal in Doha Cables is therefore 47.3%.

In 2018, the importation of raw materials and empty drums caused a significant rise in costs. This will be better controlled once Senyar Industries finishes establishing the factories for the production of copper and drums in Qatar.

Also in the year, Doha Cables established a new high-voltage testing lab, acquired product certif icate approval from British Approval Services for Cables (BASEC) for all cables’ ranges; increased production capacity from 52,000 tonnes per annum to 60,000 tonnes; and further upgraded the certif ication provided by the Loss Prevention Certification Board (LPCB) for single core cables from 450/750V to 600/1000V.

In 2019, Doha Cables intends to establish another testing laboratory and acquire a third-party Type Test Approval for LV and MV Cables. Doha Cables also aims to increase the capacity of HV cables manufacturing and increase exports.

Doha Cables intends to establish another testing laboratory and acquire a third-party Type Test Approval LV and MV C

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Strategic Report


2. Aamal Readymix

An entity 100% owned by Aamal. It commenced operations in 1994, and it is one of the largest producers of quality ready-mixed concrete in Qatar with an annual production capacity of 600,000 cubic meters.

In 2018, the Lusail Batching Plant was relocated to the new Manateq Industrial Zone in Mazroua, while Aamal Readymix also completed the installation and commissioning of two Liebherr Batching plants, two ice plants and a recycling plant at the Bu-Qalila site. The new factory is fully renovated and is significantly larger than the previous Lusail factory. Aamal Readymix has taken advantage of the increased factory size and increased its raw material storage capacity by 50,000 tonnes. This signif icant increase in capacity leaves Aamal well-positioned to support major projects in adjacent areas. Furthermore, a new maintenance facility and labour accommodation has been built at the new factory site at Bu-Qalila to meet the maintenance requirements of expanding the heavy-vehicle fleet. This new facility is now fully equipped with state-of-the-art equipment.

Aamal Readymix also upgraded its product range in line with the requirements of new projects. Currently, Aamal Readymix is supplying high strength concrete, high performance concrete, shotcrete, lightweight concrete and sustainable green concrete. Aamal Readymix’ top performing green sustainable concrete is based on recycled cementitious materials that have extremely high strength and durability.

3. Aamal Cement Industries (ACI)

Aamal Company owns 99%. It commenced production of decorative interlocking paving stones and concrete blocks in 2010 with an annual production capacity of approximately 25 million blocks or two million square metres of paving stones. The plant has one of the largest block and pavement making machines in Qatar.

In 2018, precast elements increased by 119% and there was a 252.4% increase on Heavy Duty Road Curbs on the New Wet Press 2 mainly Trief Curb and Vehicle Barrier Unit (VBU).

ACI was ISO 9001 certified after a successful audit and continuation of 14001 and 18001 standards. Additional precast initiatives will be evaluated for 2019.

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Strategic Report

5. Advanced Pipes and Casts Company (APC)

Aamal owns 50% of Advanced Pipes and Cast s Company (APC) which was established in July 2010 as a joint venture between the Company and Lokma Group, a leading pipe manufacturer in the Middle East. APC started commercial production at the end of 2014, with an extensive production capacity that is largely automated and has the flexibility to respond swiftly to changes in end-market demand.

In 2018, APC produced for the first time 3000mm of concrete pipe, and APC produced the molds used in the production process.

6. Frijns Structural Steel Middle East

Aamal has a 20% interest in Frijns Structural Steel (60% is held by Frijns Industrial Group of the Netherlands; the remaining 20% is held by a third party). Frijns Structural Steel – Middle East started operations in Qatar in 2009 after opening its first production facility in the region which produces steel for the petrochemical and process industries, including all associated engineering, production, anti-corrosion, construction and assembly work.

Despite a lower growth rate and fierce price competition in 2018, Frijns Middle successfully surpassed market growth rates to generate revenues and profit margins which exceeded budget expectations. This was achieved by optimising resource usage, sourcing cost efficiencies and generating operational synergies. In order to meet the “One Stop Shop” requirements of the market, Frijns also added a business line called “Building Envelope Products and Services” to its product portfolio.

In 2019, Frijns intends to further penetrate the market and expand into the energy sector, focusing on the energy sector requirements of Qatar while maintaining its strong market position and reputation in the construction market. This will be achieved by adapting to the price level requirements of the core market and further focus on operational synergies within the company and its stakeholders, focusing on sustainable growth.

7. Innovative Lighting

Aamal owns 70% of Innovative Lighting ‘QLEDs’, a joint venture with C&C Lightway of South Korea, and a separate third party. This entity is currently in liquidation.


4. Ci-San Trading

Aamal has a 50% interest in Ci-San Trading (the other 50% is held by Masraf Al Rayan). A partnership agreement between Aamal Company and Masraf Al Rayan was signed in 2008 creating Ci-San Trading Company. The company was set-up to evaluate investments in various sectors such as industrial, real estate and trading, in both local and international markets.

Gulf Rocks

Aamal’s effective ownership is 74.5%. In 2012, Ci-San Trading purchased 51% with Aamal directly acquiring the remaining 49%. Gulf Rocks was established in 2000 and is a leading importer and provider of high-quality gabbro aggregates, which are widely used in concrete products.

In 2018, a vessel was assigned to fulf ill the Gulf Rocks Gabbro import requirements by Aamal Maritime Transportation Services (AMTS), the result of increased demand for aggregates. In turn, this has driven a reduction in shipping costs and Gulf Rocks was able to offer more competitive prices.

Aamal Maritime for Transportation Services (AMTS)

Aamal holds 1% of the shares directly, with the remaining 99% held by Gulf Rocks. Aamal has an overall effective interest of 74.75% in AMTS and owns two vessels, ‘Um Al Hanaya’ and ‘Al Rayyan’ – both bulk carriers each with capacities in excess of 56,000 tonnes.

In 2018, the vessels commenced operations in the Far East and Europe – two new markets. AMTS is witnessing increased demand for vessels in both local and international markets which is expected to have a positive influence on future performance.

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Strategic Report



Revenue 696.4 633.3 9.9%Net profit 125.3 116.2 7.8%Net profit margin % 18.0% 18.3% (0.3) ppts

This is largely attributable to the success of Ebn Sina Medical – the largest business in the Trading and Distribution segment – which has enjoyed a particularly successful year reporting a 28% year-on-year increases in revenue and 29% net profit.

Aamal Trading and Distribution, the exclusive distributor in Qatar of Bridgestone tyres and Total Lubricants, contended with diff icult market conditions in 2018, driven by increased competition from cheaper alternative products and leading to a 9% decline in revenue.

Overall segment highlights in 2018:Aamal Trading and Distribution operations currently include:1. Aamal Trading and Distribution: a leading distributor of

automotive products and home appliances2. Aamal Medical: a leading medical equipment supplier3. Ebn Sina Medical: the leading pharmaceutical distribution company

in Qatar4. Foot Care Centre: provider of a range of foot care services and

products5. Ebn Sina Health Care Pharmacy: a modern chain of pharmacies

located in City Center Doha6. Legend for Trading: a company trading in automobile products7. Aamal Optical Supplies: currently in liquidation

Revenue in the Trading and Distribution segment increased significantly, by 9.9% year-on-year to QAR 696.4m, with net profit increasing 7.8% year-on-year to QAR 125.3m.

1. Aamal Trading and Distribution

Aamal owns 100% of Aamal Trading and Distribution, the exclusive distributor in Qatar of Bridgestone tyres since 1971 and a non-exclusive distributor of TOTAL oil and lubricant products since 1990. It is also involved in the supply, installation and commissioning of own brand GETTCO home appliances and maintenance of air conditioning and refrigeration equipment.

In 2018, Aamal Trading and Distribution launched its first ‘Pit Stop Service’ in Qatar, offering oil change, wash and mechanical repairs for trucks, equipment and light vehicles. The company faced fierce market competition due to the availability of cheaper products and the import of own-brand products by dealers. Furthermore, tender companies are frequently awarding a single contract to multiple vendors in order to reduce the supply chain and project timeline risk which created a challenge for Aamal Trading and Distribution.

In 2019, Aamal Trading and Distribution intends to progress discussions with Bridgestone to expand their brand offerings, enabling them to better compete with cheaper brands in the market.

30


Strategic Report

2. Aamal Medical

Aamal owns 100% of Aamal Medical, a leading medical equipment supplier in Qatar. Aamal Medical has exclusive distribution agreements with a number of leading international medical equipment suppliers. In addition to sales of medical equipment, Aamal Medical also provides consultancy services focused on the development of operating room theatres and installs hospital information systems.

In 2018, Aamal Medical established new partnerships with suppliers of f irst-class medical equipment, with the purpose of diversifying its offerings to the market. These include:

– Tontarra (Germany): offers a broad spectrum of surgical and standard-type instruments for all f ields of general and special surgery including coronary surgery, vascular surgery, gastro-intestinal surgery, dermatology, neurosurgery and ENT, in addition to many other state-of-the-art medical products.

– STOCKART (Turkey): offers smart healthcare technologies, including a process management solution equipped with advanced technologies oriented towards patient safety and cost control. This allows for real-time tracking of medication and supplies from hospital warehouses to pharmacies, wards and the end patients.

– XION (Germany): one of the few companies offering complete endoscopy systems for use in arthroscopy, ENT, laparoscopy and gynaecology. Innovative instruments and devices with high-class functionality are requisite for modern diagnostics and therapy procedures. XION consistently meets high demands and has a track record for maintaining extremely high-quality offerings for more than 25 years. The product range includes rigid and flexible endoscopes, navigation and camera systems, light sources, suction and irrigation pumps, insufflators and other equipment.

Furthermore, Aamal Medical successfully installed the Oracle Fusion System for HR and Finance modules to further enhance operational efficiency and internal processes.

Trading and Distribution continued

3. Ebn Sina Medical

Aamal owns 100% of Ebn Sina Medical, the leading provider of pharmaceutical, hospital supplies and consumer health products in Qatar, representing in excess of 50 international leading healthcare manufacturers from more than 20 countries including Roche, AstraZeneca, Novartis Pharma, B-Braun, Boston Scientific and Nuxe. Ebn Sina Medical also operates a retail chain that includes a pharmacy and three Foot Care Centres providing a range of clinical foot care services, foot care products and specialist footwear.

In 2018, Ebn Sina Medical successfully established several new strategic partnerships with suppliers enabling the company to overcome issues associated with the Qatar border blockade, develop more eff icient supply chains and improve its offerings. These partnerships include:

– Kyowa Kitin – UK, Pharmaceutical Company – Amryt Pharmaceutical – Ireland, Pharmaceutical Company – Atnahs Company – UK, Pharmaceutical Company – PharmaEyo Company – Pakistan, Pharmaceutical Company – Oxypas Company – Belgium, Footwear and Foot Care Products – GPI Company – Italy, Pharmacy and Warehouses Automation

Ebn Sina Medical implemented a number of incentives to improve standards across the business. For example, the warehouse temperature and humidity systems were upgraded by the installation of the latest Hanwell Synergy and Testo-Online Software and a project was initiated with SGS Company for attaining an international Good Distribution Practice (‘GDP’) Certification. Additionally, the company secured DC2 approval for a new warehousing facility at Manateq, which is equipped with the latest technology helping to facilitate automation, and the HR and Finance modules of the Oracle Fusion System were implemented.

Ebn Sina successfully passed pharmaceutical audits undertaken by their multinational suppliers and the company registered many pharmaceutical and herbal products with the Ministry of Health (‘MOH’) allowing the company to bring these products to Qatar.

Branch of Aamal Q.S.C.

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Strategic Report

Trading and Distribution continued

4. Foot Care Centre

Aamal has a 100% interest in Foot Care Centre, offering a broad range of biomechanical, orthopedic and therapeutic services for feet along with a variety of foot care products from the well-known brand SCHOLL. Foot Care Centre is managed by Ebn Sina Medical and it has three operating branches, the third branch opened in 2018 at City Center Doha shopping mall.

Foot Care Centre is a registered trademark in Qatar.

5. Ebn Sina Health Care Pharmacy

Aamal has a 100% interest in Ebn Sina Pharmacy (formerly known as Ebn Sina Health Care Solutions). Ebn Sina Pharmacy is managed by Ebn Sina Medical and a rebrand has been undertaken ahead of expansion plans that are expected for this pharmacy chain.

In 2018, a new Ebn Sina Pharmacy opened at Ras Abu Aboud, renovation works started for Ebn Sina Pharmacy at City Center Doha shopping mall and the f irst ‘Pharmacy Robot’ in Qatar has been installed. The company also signed a contract for a new pharmacy at Musheireb Rail Station which is expected to open during the first quarter of 2019.

6. Legend for Trading

Aamal has a 100% interest in Legend for Trading. The company was established in 2017 to trade in a vast selection of automobile products.

7. Aamal Optical Supplies W.L.L.

Aamal has a 51% interest in Aamal Optical Supplies. A partnership agreement between Aamal Company and Qatar Optics was signed in 2014 establishing Aamal Optical Supplies W.L.L., the intention being to import and distribute both contact and prescription lenses (and their manufacture), along with other eye care products and services. However, this business never became operational and is currently in liquidation.

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Strategic Report


Revenue 295.4 320.9 (7.9%)Net profit – fully consolidated activities 235.7 262.6 (10.2%)Net underlying profit margin % 79.8% 81.8% (2.0) pptsShare of net profit of associates and joint ventures accounted for using the equity method 5.4 5.5 (1.8%)Net profit* 241.1 268.1 (10.1%)

*before fair value gains on investment properties

As a result of the ongoing upgrade and redevelopment work on Aamal’s f lagship City Center Doha shopping mall in Doha’s West Bay, the subsidiary reported an 18% decline in net profit. The renovation work, which is progressing to schedule, is being undertaken to keep abreast of competition and cement its status as the country’s premier retail destination.

Despite declining rents in the retail sector, Aamal Real Estate reported a year-on-year increase of 8% in revenue and a 7% increase in net profit. This is the result of Aamal Real Estate focusing its efforts on the residential sector and successfully expanding its residential portfolio through a number of acquisitions in early 2018 and completing the construction of a new 63-apartment residential building.

The property segment currently includes the following operations: 1. Aamal Real Estate 2. City Center Company3. Aamal ECE

In line with expectations, the Property segment has reported an 8% fall in revenue and 10% decline in net profit.

Property

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Strategic Report

1.Aamal Real Estate

Aamal owns 100% of Aamal Real Estate which comprisesa. The Souq Najma (Al Haraj), built in 1993 as a traditional

Middle Eastern souq comprising 347 shops, 25 kiosks and 24 residential flats;

b. the Markhiya residential complex; andc. four other residential buildings.

In 2018, Aamal Real Estate acquired three residential compounds comprising 24 villas and two buildings containing 20 apartments. These are located in prime locations in Doha including West Bay Lagoon, Al Waab, Abu Hamour and Madinat Khalifa.

2. City Center Company

Aamal owns 100% of City Center Doha (CCD), which opened in 2000 and was one of the first shopping malls in Doha. CCD is widely regarded as the leading mall in Qatar, supported by its twin virtues of size and prime location in the heart of the West Bay area of Doha. It is considered to be the city’s central business district with a high density of both residential towers and hotels. Against a backdrop of increased market competition in the retail sector due to the opening of the new shopping centres and a general weakening in consumer expenditure, CCD was able to maintain its leading status, with no change to overall footfall levels.

In 2018, the renovation and development work on the East Food Court was completed and the direct route connection to Rotana City Center Hotel was successfully opened. A new lease agreement with a leading retail group has been signed for 4,000 sqm, in addition to other big unit deals with different groups.

Property continued

QATAR GERMAN MALL MANAGEMENT

3. Aamal ECE (Qatar German Mall Management)

A partnership agreement between Aamal and ECE Projekt management, commercially known as Qatar German Mall Management. The company specialises in the property management of shopping centres and offers consultancy services in Qatar and the wider MENA Region.

34


Strategic Report

Aamal Services, our housekeeping business that primarily serves the business sector and the largest of the subsidiaries in this segment, reported an 11% decline in revenue but a 58% increase in net profit to QAR 6.6m. This significant increase in net profit is the result of a detailed expenditure review undertaken in early 2018 which led to the successful renegotiation of contract rates with suppliers. This assiduous focus on cost control increased Aamal Services’ net profit margin from 7% in 2017 to 13% in 2018. Although Aamal services was successful in winning two new contracts at higher profit margins, it lost of one of its major contracts, which impacted revenue and net profit for the year.

ECCO Gulf, our business process outsourcing specialist, reported increases of 24% and 56% in revenue and net profit, respectively, following the successful renewal of several major contracts and the award of a large strategic project in Qatar.

Aamal Travel, which provides a comprehensive range of travel services, had a challenging year in terms of revenues with a year-on-year decline of 11% but achieved a threefold increase in net profits. As a result, net profit margin increased materially from 5% in 2017 to 25% in 2018. Among the main drivers behind this strong performance are the implementation of an advance cash payment policy meaning that no credit facilities are offered to clients. Commission provided by the IATA has also improved.

Managed Services


Revenue 96.7 95.3 1.5%Net profit 8.2 7.0 17.1%Net profit margin % 8.5% 7.3% +1.2 ppts

While revenues in the Managed Services segment increased only marginally, up 1.5%, net profit increased 17.1% year-on-year to QAR 8m, with notable achievements across several subsidiaries.

2018 was a diff icult year for Family Entertainment Center due to heightened competition posed by the opening of new malls and parks and its location in the East Food Court of City Center Doha, which remained closed for much of the year due to renovation works. In addressing these challenges, Family Entertainment Center has established innovative new games and rides, such as Virtual Reality Games, Trampoline Park and Inflatable Games, to attract more customers. Furthermore, a more aggressive marketing approach has been adopted, leveraging attractive promotions and establishing partnerships with popular family brands.

The Managed Services operations focus primarily on providing commercial facilities management, outsourcing and other business support services, and currently include:1. ECCO Gulf: business process outsourcer2. Aamal Services: general housekeeping services provider3. Aamal Travel: travel agency4. Family Entertainment Center: an indoor amusement center with a

mixed range of rides5. Winter Wonderland: features winter themed activities6. Farazdaq Company: provider of printing solutions and trader of

office supply products7. Johnson Controls Qatar: liquidating

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Strategic Report

1. ECCO Gulf W.L.L.

Aamal Company owns 51% of ECCO Gulf which is a joint venture with ECCO Outsourcing, one of the region’s leading contact center operators and business process outsourcers. ECCO Gulf commenced operations in 2010 offering the outsourcing of business processes, professional services and human resources to clients in Qatar.

In 2018, ECCO Gulf successfully renewed several major contracts and expanded its headcount. The company was also awarded with a strategic project in Qatar, the ‘Qatar Rail 5 Year Award’.

2. Aamal Services

Aamal owns 100% of Aamal Services which provides a wide range of services including cleaning, hotel and hospitality services, waste collection and disposal (including medical waste and solid waste), ground maintenance and landscaping, pest control and fleet/ car washing.

Aamal Services had a strong start to 2018 with the successful renegotiation of several significant contracts with its suppliers, helping to ensure that costs associated with accommodation, transport and general suppliers remain in line with market values. The Facility Management market continues to face volatility in price fluctuations and remains a challenge for Aamal Services.

Managed Services continued

Nonetheless, the company signed new contracts with new suppliers, two of which are expected to yield positive results in the long term. Aamal Services also achieved organic growth within existing contracts.

3. Aamal Travel (also known as Aamal Travel Lufthansa City Center)

Aamal owns 100% of Aamal Travel, which is an International Air Transport Association (IATA) accredited travel agency providing a range of travel services, including airline reservations and ticketing, worldwide hotel bookings and holiday packages.

In 2018, Aamal Travel implemented an advance cash policy meaning no credit facilities are offered to clients and the commission margins provided by the IATA have improved. Aamal Travel registered with online sales site, mystifly.com, which provides tickets with preferred rates and resells tickets to clients based on IATA prices.

Furthermore, after The World Tourism Organisation (UNWTO) updated and disclosed its visa openness ranking late last year, Qatar was the only Gulf Cooperation Council (GCC) country to be included in the top 10 countries (out of 195) and was also ranked 1st in terms of VISA facilitation in the MENA region. The efforts of the Qatar Tourism Authority are emerging as the nation receives greater international recognition. Aamal Travel expects to see significant potential in this market as a result.

36


Strategic Report

4. Family Entertainment Center

Aamal has a 100% interest in Family Entertainment Center, otherwise known as ‘Fun City’, located on the entertainment level of City Centre Doha (CCD). With a reputation for hi-tech entertainment, Fun City offers a varied mix of rides, games and sports. Aamal acquired Family Entertainment in 2016, along with Winter Wonderland, in order to enhance the customer appeal of CCD.

In 2018, Family Entertainment Center, located in the East Food Court of the shopping mall, faced further challenges arising from the ongoing development work in the East Food Court. Furthermore, with the addition of several new shopping malls and amusement parks, competition has further intensified. To overcome these challenges, Family Entertainment Center has invested in adding new games and rides to the park such as Virtual Reality Games, Trampoline Park and Inflatable Games to attract more customers. CCD also adopted a more aggressive marketing scheme through offering many attractive promotions throughout the year, in addition to participating in promotions with strong partners.

5. Winter Wonderland

Aamal has a 100% interest in Winter Wonderland which is also located in City Center Doha. Winter Wonderland was acquired in 2016 and is a family-friendly place devoted to the pursuit of excitement, fun and comfort. It features winter adventures for the entire family to enjoy the indoors and includes an ice-skating rink, a 10-pin strike bowling alley and billiard tables.

In 2018, the ice rink was closed in the fourth quarter due to renovation works at City Center Doha which created challenges for Winter Wonderland.


37


Strategic Report


6. Johnson Controls Qatar

Aamal Company owns 51% of Johnson Controls Qatar, which provided facility improvement and energy solutions to customers in Qatar. This entity is currently in liquidation.

7. Al Farazdaq Company

Aamal Company holds 65% of A l Farazda q Com pany, w h ich commenced operations in 2013 to provide printing solutions and trades in various office supply products. The printing press is equipped with state-of-the-art printing machines offering innovative digital printing solutions to the business community. offering a wide range of high-quality stationery that is durable, innovative, reliable and competitively priced.

In 2018, Farazdaq increased direct sales to new companies that are not under the umbrella of the group and applied more stringent controls relating to the reduction of material waste produced helping to generate cost savings.

38


Strategic Report

Corporate Social Responsibility (CSR)

– The Second Business Continuity and Resilience Conference: With the increased awareness of the importance of business

continuity, Aamal took part in the Business Continuity and Resilience Forum for the second time. This forum focuses largely on the importance of establishing f irm relationships between a company’s strategic plans and its defined framework, especially during times of crisis, as it is crucial for businesses and governments to develop business continuity management strategies to mitigate such risks.

– The Second Conference on Corporate Governance: The second Corporate Governance Conference was hosted by

the Qatar Financial Markets Authority (‘QFMA’) and was focused on equipping Qatari publicly listed companies with the necessary skills and know-how to develop successful governance mechanisms and report under the recent provisions of the new QFMA governance code.

– Qatar University Company Poster Competition: Aamal was selected, among other listed companies, to support a

Qatar University project focused on educating students undertaking a Financial Analysis course, including specific exercises relating to stock analysis and discussion of the investment case of companies.

– Belgian King’s Day: In strengthening Qatar’s bilateral ties with European countries,

Aamal sponsored the Belgian Embassy’s celebrations of their national day to encourage cultural exchange between Belgium and Qatar.

– Gulf English School Career Day: This is an annual event that serves as a networking and knowledge

exchange platform whereby students are able to learn about the evolving dynamics of the job market across Qatar’s key growth sectors, explore potential career choices and connect with the country’s leading players and organisations for future employment opportunities.

– Qatar University Volunteer Youth Forum: A forum organised by Qatar University which brings together

participants and volunteers from the region to promote volunteerism and community service.

Aamal Company has supported several activities that aim to increase awareness of best practice in business, governance and cultural exchange. Our subsidiaries continued to build upon their core values of responsibility and sustainability implementing strategies that address environmental issues, empower people and provide training and safety awareness programmes to all their employees.

39


Strategic Report

Corporate Social Responsibility (CSR) continued

Subsidiaries CSR initiatives:Key CSR activities by SegmentIndustrial Manufacturing:

Aamal Readymix: – Installed two recycling plants to process and segregate all solid

waste generated by its operations. – Installed a water reclaim system to utilise waste water during

fleet washing.

Aamal Cement Industries ‘ACI’: – ACI was ISO 9001 certified, the international standard for quality

management system (QMS), after a successful audit and also maintained its ISO 14001 certif ication which is related to environmental management standards and 18001 standards related to occupational health and safety management systems.

Doha Cables:Continued its role in providing training for university students and engineers.

– Employee contributions were provided for Kerla food relief and for the Indonesia tsunami.

Trading and Distribution:

Ebn Sina Medical: – Maintained an assiduous focus on education through the

adoption of two programmes:– support of Pharmacy students at the University of Qatar and

the College of the North Atlantic, through the provision of collaborative training and work experience opportunities within the Ebn Sina Pharmacy chain; and

– support of a scholarship programme for Pharmacy students at the University of Qatar studying for bachelors, masters and PhD degrees

Managed Services:

Aamal Services: – Employed only environmentally friendly chemical materials

and equipment. – Used chemical f luids that are ready for use, as opposed to

requiring preparation, so as to eliminate the scope for wastage. – Reduced water usage through the use of steam machines rather

than jet pressure washers. – Reused microfibre cloths so to limit wastage. – Encouraged customers to opt for air f low dryers rather than

paper towels. – Engaged in a Government initiative to improve computer literacy

skills, whereby laptops and computer training for all its employees within the industrial area are provided free of charge.

Aamal will continue to build upon its core values of responsibility and sustainability, implementing strategies that address environmental issues, empower people and provide training and safety awareness programmes to all its employees.

40



ObjectiveThe Board of Directors (the “Board” or “BoD”) and the Executive Management of Aamal Company Q.P.S.C. (the “Company” or “Aamal”) believe that a strong corporate governance framework is critical to ensuring high performance across all of the Company’s activities and its subsidiaries (together the “Group”), and is essential to building investor trust and providing safeguards against any misguided corporate activity.

The Board has adopted a Corporate Governance Framework, which relates to the way in which the affairs of Aamal are governed and managed by the Board, the committees of the Board and the Executive Management team. It is a governance ecosystem by which Aamal is directed and controlled, taking into consideration the interests of all its stakeholders not just its shareholders.

Aamal’s Corporate Governance Framework, together with its associated policies, comply with all relevant rules and regulations issued by the Qatar Financial Markets Authority (“QFMA” or the “Authority”) including the Governance Code for Companies and Legal Entities Listed on the Main Market No. (5) of 2016 (the “Code”), the Company’s Articles of Association (or “AoA”), and the Commercial Companies Law No. (11) of 2015 (the “Companies Law”).

Commitment to comply with Corporate Governance The BOD and Executive Management are committed to the best practices detailed in Aamal Corporate Governance Framework, in order to achieve the Company’s objectives.

ScopeThe goal of the Annual Corporate Governance Report is to ensure transparency and disclosure of the governance practices within Aamal. It represents the values of the Company and the policies that all parties must abide by.

Corporate Governance achievements for the year ended 31 December 2018In order to enhance the Corporate Governance culture across the Group, Aamal has developed its corporate governance practices. These new developments target both organisational aspects as well as other governance processes.

In connection with the adoption and implementation of the new regulatory developments issued by the QFMA, Aamal has developed and commenced implementing numerous initiatives in line with the new requirements of the Code, including but not limited to the following: 1. Amended its Articles of Association to comply with the Code.2. Continued to enhance its Corporate Governance Framework with

the aim of achieving full compliance with the Code.3. Updated its Internal Control Framework relating to f inancial

reporting.4. Restructured the Board and its committees in accordance with the

requirements of the Code:a. The size of the Board was increased from 6 to 9 Directors and a

third of the seats were allocated to Independent Directors.b. Elections were held to appoint Independent Directors who shall

serve until the end of the current Board’s tenor.c. Independent Directors were appointed to Board committees in

accordance with the Company’s new Corporate Governance Framework and the requirements of the Code.

d. The Compensation Committee subsumed the Nomination Committee to constitute a single committee referred to as the Nomination and Remuneration Committee.

e. The Corporate Governance Committee was dissolved and the responsibility to draft the Corporate Governance Report was delegated to Executive Management.

Corporate Governance Framework

41



Corporate Governance Framework continued

Board of DirectorsSize and charterMembers of the Board are elected by the shareholders at the Annual General Assembly for a three-year term. As of 31 December 2018, the Board has nine (9) Board members, of which three (3) are independent, as required by the Articles of Association. .

Board compositionThe board is composed of the following members as of 31 December 2018:

Director Name Party representedDate of Election/Appointment Position

Member classification

Breakdown of shares

Units %

Sheikh Faisal Qassim Faisal Al Thani

In his personal capacity 17 April 2016 Chairman Non-executive 157,373,5541 24.97

Sheikh Mohammed Faisal Qassim Al Thani

In his personal capacity 17 April 2016 Vice-Chairman Managing Director

Executive 6,300,0001 1.00

Sheikh Jabr Abdulrahman Jabr Al Thani

Al Faisal Holding Company W.L.L.

Re-elected on 17 April 2016 (Representative appointed on 5 February 2017)

Ordinary Member Non-executive 1,0901 283,500,000

45.00

Sheikh Abdullah Hamad Qassim Al Thani

Al Jazi Real Estate Investment Company W.L.L.


Ordinary Member Non-executive 6,300,0002 1.00

Sheikha Al Jazi Faisal Qassim Al Thani

Al Rayyan International Educational Company W.L.L.

Re-elected on 17 April 2016

Ordinary Member Non-executive 3,150,0001 6,300,0002

1.00

Kamel Muhammad Al Agla City Limousine Company W.L.L.


Ordinary Member Non-executive 6,300,0002 1.00

Yousef Bin Rashed Alkhater In his personal capacity 22 April 2018 Independent Non-executive 0 0

Faisal bin Abdullah bin Zayed Almahmoud

In his personal capacity 22 April 2018 Independent Non-executive 0 0

Hamad Rashed Ali Almansour Alnaimi

In his personal capacity 22 April 2018 Independent Non-executive 0 0

1. Held directly in a personal capacity2. Held by the business entity whom the director is the representative

Non-Executive Board membersDuring the year ended 31 December 2018, the majority of the Board members were non-executive members. The Company applies the strict definition of “Non-executive Board member” according to the Code i.e. “Non-executive Board members are those who are not performing executive management duties in the Company, who are not dedicated full time and who do not receive monthly or yearly remuneration from the Company other than remuneration received as a Board member.”

Independence The Company acknowledges that as per the corporate governance rules, at least one third of the Board members are independent, and exerts its best effort to realise the independence of one third of the Board members.

The current independent Board members are not under the influence of any factors that limit their capacity to deliberate on Company matters in an unbiased and objective manner based on known and existing facts.

Prohibition of combining positionsThe Board members will refrain from combining prohibited positions, in compliance with Article 7 of the Code.

The Board members provide the Board secretary with an Independence and Conflict of Interest Declaration annually, to declare whether they hold any legally prohibited positions.

42




Board members’ experience and membership on other boards

Director Name Experience and membership on other boards

Sheikh Faisal Qassim Faisal Al Thani – Founder and Chairman of Aamal Company Q.P.S.C. – Chairman of the Board since the listing on the Qatar Stock Exchange in 2007 – Chairman of Al Faisal Holding Company W.L.L. – Chairman of the Qatari Businessmen Association – Member of the Board of Trustees at Qatar University – Founder and Chairman of Al Faisal Without Borders Foundation – Founder and Chairman of the board of trustees of Sheikh Faisal Bin Qassim Al Thani Museum – Chairman of the Gulf Qatari Classic Cars Association – Member of the Board of Trustees at the College of Business in DePaul University in Chicago

Sheikh Mohammed Faisal Qassim Al Thani – Vice Chairman and Managing Director of Aamal Company Q.P.S.C. – Board member of Aamal Company Q.P.S.C. since 2009 – Board member of Al Khaliji Bank Q.P.S.C. – Chairman of Optimised Holding W.L.L. – Holds a Bachelor’s degree in Business Administration from Carnegie Mellon University, Qatar – Honourary President of the Italian Chamber of Commerce in Qatar

Sheikh Jabr Abdulrahman Jabr Al Thani(Representative of Al Faisal Holding Company W.L.L.)

– Board member of Aamal Company Q.P.S.C. since February 2017 – Vice Chairman and Managing Director of Transind Group since 2004 – Founder and Managing Director of Al-Bayan Insurance Broker since 2011 – Managing Director of Al Arabi Sports Club – Holds a Bachelor of Business Administration from European University, Geneva, Switzerland – Certified Financial Analyst from the American Academy of Financial Management – Holds a Professional Diploma in Financial Management and Banking from the Arab Academy

for Banking and Financial Sciences

Sheikh Abdullah Hamad Qassim Al Thani(Representative of Al Jazi Real Estate Investment Company W.L.L.)

– Board member of Aamal since 2010 – Attained the rank of Major in the Qatari Armed Forces – Holds a Bachelor’s degree in Business from Kingston University, UK

Sheikha Al Jazi Faisal Qassim Al Thani(Representative of Al Rayyan International Educational Company W.L.L.)

– Board member of Aamal Company Q.P.S.C. since 2016 – Holds a Master’s degree in International Peace and Security from King’s College London, UK – Holds a Bachelor’s degree in Culture and Politics from Georgetown University, Qatar

Kamel Muhammad Al Agla(Representative of City Limousine Company W.L.L.)

– Board member of Aamal Company Q.P.S.C. since February 2017 – Chief Real Estate Officer of Al Faisal Holding – Joined Al Faisal Holding in 1985, since then he has spearheaded most of Al Faisal’s

construction projects, including the development of the Company’s iconic real estate assets – Holds a Bachelor’s degree in Civil Engineering from Al Azhar University, Egypt

HE Mr. Yousef Bin Rashed Alkhater – Over 29 years of experience in executive and public management, and project management with Qatar Petroleum Company (QP) and several other international companies in the oil and gas industry such as Exxon Mobil and Conoco Philips, Occidental Petroleum Qatar, and Total

– In 2011, appointed as an Economic Consultant in HE’s the Prime Minister’s Office in Qatar to manage (Elan Company) and the restructuring of the company from June 2012 to April 2014

– CEO of Barwa Real Estate from April 2009 to March 2011 – CEO and Board member of Gulf Drilling International and Board member of Gulf International

Services Company from December 2004 to April 2009 – Board member of Qatar’s Advisory Council (Shura Council) since October 2004) – Member of the Arab Interim Parliament and International Union Parliament – Holds a Bachelor’s degree in Industrial Engineering (with honours) from Fairleigh Dickinson

University, New Jersey, USA

HE Mr. Faisal bin Abdullah bin Zayed Almahmoud – Owner of Baytak for Development Company – Partner and Chairman of the Turkish Company MRD for Trading and Contracting – Board member in Al Madaen Company – Previously held the roles of Minister of the Ministry of Endowments and Islamic Affairs,

Deputy Minister of the Ministry of Endowments and Islamic Affairs, Chairman of the Administration of the General Authority of Endowments, Chairman of the Administration of the General Authority for Minors and their rule, Chairman of Mawashi Company and a Board member of Al Jazeera for Investments

– Holds a Bachelor’s degree in Sharia and Islamic Studies from the College of Sharia and Islamic Studies at Qatar University, Qatar

43




Board’s role The Board independently oversees the activities of the Company with the objective of sustainable creation of value, considering the interests of the shareholders, its employees and other stakeholders.

The Board members act in good faith and in such a manner, as they reasonably believe, to be in the best interests of the Company. The Directors also:

– Comply with all applicable laws, regulations, confidentiality obligations and other corporate policies of the Company.

– Follow all policies, procedures and internal control systems of the Company.

– Act with honesty, good faith and in the best interests of the Company, and not in the interest of the group it represents, or who voted for him.

The Board commits to complying with the principles of justice and equality among stakeholders without discrimination among them on basis of race, gender or religion, and transparency.

Segregation of the Chairman and the Chief Executive Officer (CEO) and Managing Director (MD) rolesIn accordance with the QFMA Code, the role of the Chairman and MD are distinct and separate. The same person should not hold or exercise the positions of Chairman and MD at the same time. There is a clear segregation of responsibilities between the two positions in Aamal.

All Board members are compliant with Article 7 of QFMA’s Code regarding their abstinence from holding or combining prohibited positions.

The Board’s composition is balanced and the company’s structure limits having one person in the Company holding unfettered powers to make decisions.

Board Committees The Board forms committees with suf f icient exper tise. The committees serve to increase the efficiency of the Board’s work and the handling of complex issues. The nominated committee chairmen report regularly to the Board on the work of their respective committees.

In order to comply with the Code, the Board reorganised the committees and their composition and constituted the following three (3) committees on 28 February 2018:

– Executive Committee – Audit Committee – Nomination & Remuneration Committee

The Board concurrently approved the revised committees’ charters and issued decisions to nominate the chairman and members of each committee, identifying its responsibilities, duties, and work provisions and procedures.

Changes in the Committee’s membership during 2018On 28 February 2018, all committee members were removed to make way for reconstituting the Board committee in a manner compliant with the Code. On 29 April 2018, after amending the Articles of Association and electing independent directors to the Board, the Board appointed new Chairs and committee members in accordance with the requirements of the Code.

Director Name Experience and membership on other boards

Mr. Hamad Rashed Ali Almansour Alnaimi – Currently works at Ministry of Endowments and Islamic Affairs – Owner of IT Company in Doha – Owner of Mobile Link for Security Systems – Owner of Trust for Oils Company – Holds a Bachelor’s degree in Library Sciences from Qatar University, Qatar

44




Executive CommitteeThe Executive Committee is largely responsible for handling the Company’s strategy, investments and financing by reviewing, evaluating, and recommending the strategic plans and decisions taken by the Board.

The Committee was composed of the following members for the year ended 31 December 2018:

Name Position Member status

Sheikh Mohamed Faisal Qassim Al Thani Committee Chairman Non-independent

Sheikha Al Jazi Faisal Al Thani Member Non-independent

Sheikh Jabor Abdul Rahman Al Thani Member Non-independent

Mr. Hamad Al Nuaimi Member Independent

Audit CommitteeThe Audit Committee handles issues related to financial reporting, risk management, compliance, the appointment and work of the external auditor (including determining the independence of the external auditor, issuing the audit mandate to the external auditor, determining auditing focal points and negotiating the fee agreement with the external auditor subject to the approval of the General Meeting).

The Committee was composed of the following members for the year ended 31 December 2018:


HE Mr. Yousef Al Khater Committee Chairman Independent

Mr. Hamad Al Nuaimi Member Independent

Mr. Kamel Al Agla Member Non-independent

Nomination & Remuneration Committee The Nomination and Remuneration Committee shall identify, screen and recommend nominees for Board elections and recommend nominees for Executive Management positions. The Committee aims to sustain long-term value for shareholders by ensuring that the Company can attract, develop and retain high-performing and motivated directors and senior executive management in a competitive, international market.


Mr. Kamel Al Agla Committee Chairman Non-Independent

Sheikh Mohamed Faisal Al Thani Member Non-Independent

HE Mr. Faisal Al Mahmoud Member Independent

45



Sheikh Mohammed Bin Faisal Al Thani

Vice Chairman and Managing Director

Parveez AslamAamal Readymix, Aamal Cement Industries, Gulf Rocks and Aamal

Maritime for Transportation Services

Chris PakhanianAl Farazdaq Company

Baris Sezen City Center Doha

Shambil Basit Aamal Trading and Distribution

Ahmed El SewedyEl Sewedy Cables Qatar and

Doha Cables

Rob FrijnsFrijns Structural Steel Middle East

Mr. Mohammad Ramahi Chief Financial Officer

Sherif ShehataAamal Medical, and Ebn Sina

Medical

Amr Gohar ECCO Gulf

Keith Smith Aamal Cement Industries

Joseph McMullanAamal Services

Executive Management

General Managers of Companies

46

SHAREHOLDERS

Board of Directors Secretary

BOARD OF DIRECTORS

Chairman

Managing Director

Business Development Department

Chief Business Development Officer Chief Operating Officer Chief Legal Officer Chief Financial Officer

Legal Department

Aamal SubsidiariesGeneral Managers

SubsidiariesOperations

Human Capital Development

CorporateCommunications

ProcurementDepartment

Information Technology

Department*

Investor Relations

AdministrationDepartment

TreasuryDepartment

Finance Department, Head Office

and Subsidiaries

Nomination and Remuneration

Committee

Executive Committee

Audit Committee



* IT Solutions are outsourced

Organisational Structure

47



The Annual Ordinary & Extra-ordinary General Assembly meetings of the Company will be held on Monday, April 15th, 2019 at 4:30pm at the Shangri La Hotel, Shangri La Hall. In the event that a quorum is not achieved at either of the meetings, the meeting(s) will be then held on Monday, April 22nd, 2019 at 4:30pm at the aforementioned location.

Agenda of the Extra-Ordinary General Assembly Meeting1. To discuss and approve the amendments to the Articles of Association of the Company in accordance with the requirements of the Corporate

Governance Code for listed companies and legal entities issued by Qatar Financial Markets Authority’s (QFMA) Board directive no. (5) for the year 2016 and the directives issued by QFMA regarding splitting the Company’s stock.

2. Referencing the above mentioned point (1) to authorise the Chairman of the Board, Sheikh Faisal Qassim Al Thani, to sign the new Articles of Association for the purposes of authenticating the new Articles of Association by the relevant authorities, and to approve the Chairman delegating the Company’s staff undertaking the necessary steps to complete the authentication and registration of the new Articles of Association with the relevant authorities.

Agenda of the Ordinary General Assembly Meeting1. To hear and approve Chairman’s report on the Company’s activities and the financial position for the financial year ended 31 December 2018,

and hearing the Company’s future business plan.2. To hear and approve the External Auditor’s report on the Company’s Financial Statements for the year ended 31 December 2018.3. To discuss and approve the Company’s Financial Statements, profits and losses for the financial year ended 31 December 2018.4. To discuss and approve the proposal of the Board of Directors to distribute cash dividends to the current shareholders the sum of 6% of the

nominal value of each share of the Company that they own at the close of the trading hours on the date of holding the Annual General Assembly of (i.e. QR 0.60 per share)

5. To discharge Members of the Board of Directors from their directorship responsibilities having been met for the financial year ended 31 December 2018 and to determine their bonus.

6. To discuss and approve the Company’s Corporate Governance Report for the year 2018.7. To elect board members that shall serve for a three-year period starting from April 15th, 2019 until the date set for holding the Company’s

Annual General Assembly for the year ending 31 December 2021.8. To appoint the External Audit for the Financial Year of 2019 and decide their fees.

Notes: 1. Shareholders are kindly requested to present their personal ID and proxies at least one (1) hour prior to the start of the scheduled meeting so as

to enable registration of attendees and ascertain number of shares held by each attending Shareholder.2. Any modification to the proxy form by the Shareholder shall render the form null and void.3. Only the Company Shareholders can represent other Shareholders, through proxies, in the Extraordinary and Ordinary General

Assembly Meetings.4. Shareholders cannot delegate one of the Board of Directors to attend the Extra-ordinary and Ordinary General Assembly Meetings on

his behalf.5. Delegated Shareholders cannot possess more than 5% of the Shares of the Company.6. Those persons representing Companies that own Shares in the Company, shall present a delegation from said Companies delegating them to

attend the Extra-ordinary and Ordinary General Assembly Meeting.7. Except for legal entities, each Shareholder may not represent, whether on behalf of him/herself and/or other shareholders, more than 25% of

the total votes present at the Extra-ordinary and Ordinary General Assembly Meetings.8. Pursuant to the provisions of the Law No. 11 of the Year 2015, publication of this invitation is deemed valid without the need for invitation

by post.

Annual Ordinary and Extra Ordinary General Assembly Meeting

48


Financials

Independent auditor’s report to the shareholders of Aamal Company Q.P.S.C.

Report on the audit of the consolidated financial statementsOur opinionIn our opinion, the consolidated financial statements of Aamal Company Q.P.S.C. (the “Company”) and its subsidiaries (together the “Group”) 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 (“IFRS”).

What we have auditedThe Group’s consolidated financial statements comprise:

– the consolidated statement of financial position as at 31 December 2018; – the consolidated statement of profit or loss and other comprehensive income for the year then ended; – the consolidated statement of changes in equity for the year then ended; – the consolidated statement of cash flows for the year then ended; and – the notes to the consolidated financial statements, which include a summary of significant accounting policies.

Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.

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

IndependenceWe are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the ethical requirements that are relevant to our audit of the consolidated financial statements in the State of Qatar. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

Our audit approachOverview

Materiality

Key audit ma�ers

Groupscoping

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where the Directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

Key audit mattersKey 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 period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

49


Financials

Key audit matter How our audit addressed the Key audit matter

Valuation of investment propertiesAs mentioned in note 5 of the consolidated financial statements, the Group has investment properties recorded under the fair value model and the fair value gains or losses are recorded in the consolidated statement of profit or loss and other comprehensive income.

The Group’s investment properties are based in the State of Qatar. The carrying value of investment properties in the consolidated statement of financial position is QR 7,168,589,734 as at 31 December 2018.

The valuations of properties were carried out by independent third party valuers with experience of the local market in which the properties are held.

The fair value of the investment properties were determined as follows: – Lands: Comparable market approach; – Income generating assets: Depreciated replacement cost

method; and – Properties under development: Cost method where fair value

cannot be reliably measured.

In determining the property’s value, the valuers have taken into account property-specific information, such as useful life and comparable market rate to arrive at the final valuation.

We focused on this area because the valuation of the Group’s investment property portfolio is subject to significant judgement, assumptions and estimates.

The total assets of the Group amount to QR 9,046,154,697 out of which the investment properties account 79% of the total assets. The reported results and financial position of the Group could be materially affected if the estimates and judgements change.

Our audit procedures in relation to the valuation of investment properties included:

– Obtaining and reviewing the latest valuation reports prepared by the external valuers, and assessing their independence and competencies;

– Verifying on test basis the key assumption (i.e. useful life of the asset and the comparable market rate), valuation methodologies adopted, and the appropriateness of the valuation outcomes;

– Using our own property valuation experts to independently review the appropriateness of the valuation methodologies adopted and the comparable evidence for all valuation assumptions to ensure alignment to the real estate market;

– Comparing useful life of the assets, depreciated build rates and the land rates against external market data, where available and re-calculating the external valuations using our own valuation models; and

– Evaluating the sensitivity analysis performed by management and the disclosures relating to the valuation.

Other informationThe directors are responsible for the other information. The other information comprises Board of Directors’ Report and the complete Annual Report.

Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, 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, on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

50


Financials

Independent auditor’s report to the shareholders of Aamal Company Q.P.S.C. continued

Responsibilities of management and those charged with governance for the consolidated financial statementsManagement is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS and with the requirements of the Qatar Commercial Companies Law number 11 of 2015, 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 statementsOur 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 auditor’s 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 scepticism 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.

– 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 and, based on the audit evidence obtained, 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 are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are 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 entities 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 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 period and are therefore the key audit matters. We describe these matters in our auditor’s 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.

51


Financials

Report on other legal and regulatory requirementsFurther, as required by the Qatar Commercial Companies Law number 11 of 2015, we report that:

– We have obtained all the information we considered necessary for the purpose of our audit; – The Company has carried out a physical verification of inventories at the year-end in accordance with observed principles; – The Company has maintained proper books of account and the consolidated financial statements are in agreement therewith; – The financial information included in the Board of Directors’ Report is in agreement with the books and records of the Company; and – Nothing has come to our attention, which causes us to believe that the Company has breached any of the provisions of the Qatar Commercial

Companies Law number 11 of 2015, or of its Articles of Association, which would materially affect the reported results of its operations or its consolidated financial position as at 31 December 2018.

For and on behalf of PricewaterhouseCoopers – Qatar Branch Qatar Financial Market Authority registration number 120155

Mohamed ElmoatazAuditor’s registration number 281Doha, State of Qatar26 February 2019

52


Financials

Consolidated Financial Statements for the Year ended 31 December 2018 (all amounts are expressed in Qatari Riyals unless otherwise stated)

Consolidated statement of financial positionat 31 December

Notes 2018 2017

AssetsNon-current assetsRetention receivables 8 6,036,326 9,468,981Equity-accounted investees 4 324,124,534 336,063,352Investment properties 5 7,168,589,734 6,892,214,727Property, plant and equipment 6 315,912,124 330,309,035

Total non-current assets 7,814,662,718 7,568,056,095

Current assetsCash and bank balances 7 605,895,048 349,747,554Trade and other receivables 8 405,154,154 470,355,157Amounts due from related parties 9 48,963,825 134,777,767Inventories 10 171,478,952 146,889,908

Total current assets 1,231,491,979 1,101,770,386

Total assets 9,046,154,697 8,669,826,481

Equity and liabilitiesEquityShare capital 11 6,300,000,000 6,300,000,000Legal reserve 12 636,791,992 592,264,928Treasury shares 11.1 – (739,279)Retained earnings 1,070,645,127 1,115,338,115

Equity attributable to equity holders of the parent 8,007,437,119 8,006,863,764Non-controlling interests 41,170,165 39,680,909

Total equity 8,048,607,284 8,046,544,673

LiabilitiesNon-current liabilitiesBorrowings 13 514,887,993 5,491,116Employees’ end of service benefits 14 26,204,583 25,259,237

Total non-current liabilities 541,092,576 30,750,353

Current liabilitiesAccounts payable and accruals 15 353,914,426 350,676,747Amounts due to related parties 16 16,874,935 13,622,338Borrowings 13 85,665,476 228,232,370

Total current liabilities 456,454,837 592,531,455

Total liabilities 997,547,413 623,281,808

Total equity and liabilities 9,046,154,697 8,669,826,481

The notes on pages 10 to 51 are an integral part of these consolidated financial statements.

The consolidated financial statements on pages 6 to 51 were authorised for issue by the Board of Directors on 26 February 2019 and were signed on its behalf by:

Sheikh Faisal Bin Qassim Al Thani Sheikh Mohamed Bin Faisal Al Thani Mohammad RamahiChairman Vice Chairman and Managing Director Chief Financial Officer

53


Financials


Consolidated statement of profit or loss and other comprehensive incomefor the year ended 31 December

Notes 2018 2017

Revenues 17 1,286,551,774 1,604,237,441Direct costs 18 (819,355,799) (1,058,643,691)

Gross profit 467,195,975 545,593,750

Other income 19 11,414,871 20,885,822Marketing and promotion expenses (7,404,681) (13,302,839)General and administrative expenses 20 (119,321,819) (125,222,834)Net impairment losses on financial assets 8 (2,997,706) (13,768,958)Gain on loss of control of subsidiaries – 22,191,741

Operating profit for the year 348,886,640 436,376,682

Finance income 1,149,668 3,018,453Finance costs 22 (2,472,879) (18,355,976)

Finance costs – net (1,323,211) (15,337,523)

Share in results of equity-accounted investees 4 100,027,580 102,025,210

Profit for the year 447,591,009 523,064,369Other comprehensive income – –

Total comprehensive income for the year 447,591,009 523,064,369

Attributable to:Equity holders of the parent 445,270,636 500,916,782Non-controlling interests 2,320,373 22,147,587

447,591,009 523,064,369

Basic and diluted earnings per share(attributable to equity holders of the parent)(expressed in QR per share) 23 0.71 0.80


54


Financials


Consolidated statement of changes in equity

Attributable to equity holders of the parent

Share capital

Legal reserve

Treasury shares

Retained earnings Total

Non-controlling interests

Total equity

Balance at 31 December 2017 as originally presented 6,300,000,000 592,264,928 (739,279) 1,115,338,115 8,006,863,764 39,680,909 8,046,544,673

Changes in accounting policy (note 3(b)) – – – (56,072,365) (56,072,365) (831,117) (56,903,482)

Restated total equity at 1 January 2018 6,300,000,000 592,264,928 (739,279) 1,059,265,750 7,950,791,399 38,849,792 7,989,641,191

Profit for the year – – – 445,270,636 445,270,636 2,320,373 447,591,009Other comprehensive income – – – – – – –

Total comprehensive income for the year – – – 445,270,636 445,270,636 2,320,373 447,591,009

Transfer to legal reserve – 44,527,064 – (44,527,064) – – –Contribution to social and

sports fund (Note 28) – – – (11,131,766) (11,131,766) – (11,131,766)

– 44,527,064 – (55,658,830) (11,131,766) – (11,131,766)

Transactions with owners in their capacity as owners

Dividends paid (Note 27) – – – (378,000,000) (378,000,000) – (378,000,000)Reissue of treasury shares

(Note 11.1) – – 739,279 (232,429) 506,850 – 506,850

Total transactions with owners – – 739,279 (378,232,429) (377,493,150) – (377,493,150)

Balance at 31 December 2018 6,300,000,000 636,791,992 – 1,070,645,127 8,007,437,119 41,170,165 8,048,607,284

Balance at 1 January 2017 6,300,000,000 542,173,250 (2,075,865) 1,055,035,931 7,895,133,316 420,008,282 8,315,141,598Profit for the year – – – 500,916,782 500,916,782 22,147,587 523,064,369Other comprehensive income – – – – – – –

Total comprehensive income for the year – – – 500,916,782 500,916,782 22,147,587 523,064,369

Transfer to legal reserve – 50,091,678 – (50,091,678) – – –Contribution to social and

sports fund (Note 28) – – – (12,522,920) (12,522,920) – (12,522,920)

– 50,091,678 – (62,614,598) (12,522,920) – (12,522,920)

Transactions with owners in their capacity as owners

Dividends paid (Note 27) – – – (378,000,000) (378,000,000) – (378,000,000)Disposals of subsidiaries – – – – – (402,474,960) (402,474,960)Reissue of treasury shares – – 1,336,586 – 1,336,586 – 1,336,586

Total transactions with owners – – 1,336,586 (378,000,000) (376,663,414) (402,474,960) (779,138,374)

Balance at 31 December 2017 6,300,000,000 592,264,928 (739,279) 1,115,338,115 8,006,863,764 39,680,909 8,046,544,673


55


Financials


Consolidated statement of cash flowsfor the year ended 31 December

Notes 2018 2017

Cash flows from operating activitiesProfit for the year 447,591,009 523,064,369Adjustments for:Depreciation 6 27,364,704 36,699,944Net movement in provision for employees’ end of service benefits 14 945,346 2,053,664Net impairment losses on financial assets 8 2,997,706 13,768,958Gain on disposal of property, plant and equipment – (1,591,661)Provision for obsolete and slow moving inventories 10 1,228,671 708,944Interest income (1,149,668) (3,018,453)Finance costs 22 2,472,879 18,355,976Gain on loss of control of subsidiaries – (22,191,741)Share in results of equity-accounted investees 4 (100,027,580) (102,025,210)

Operating profit before working capital changes: 381,423,067 465,824,790– Inventories (25,817,715) (111,603,999)– Trade and other receivables 22,781,204 106,201,698– Accounts payable and accruals (7,894,087) (14,184,818)– Net movement in amounts due from and due to related parties 89,067,236 (39,766,941)

Cash generated from operations 459,559,705 406,470,730Finance costs paid 22 (2,472,879) (18,355,976)

Net cash generated from operating activities 457,086,826 388,114,754

Cash flows from investing activitiesInterest income received 1,149,668 3,018,453Proceeds from disposal of property, plant and equipment 233,676 2,563,833Dividends received from equity-accounted investees 97,917,664 129,597,230Cash surrendered on deconsolidation of subsidiaries – (91,898,938)Additions to investment properties 5 (276,375,007) (51,169,919)Additions to property, plant and equipment 6 (13,202,166) (55,302,724)

Net cash used in investing activities (190,276,165) (63,192,065)

Cash flows from financing activitiesChanges in restricted deposits 7 (3,085,191) (2,920,000)Repayments of borrowings (240,612,517) (151,994,511)Proceeds from borrowings 607,442,500 –Dividends paid 27 (378,000,000) (378,000,000)Reissue of treasury shares 506,850 1,336,586

Net cash used in financing activities (13,748,358) (531,577,925)

Net increase/(decrease) in cash and cash equivalents 253,062,303 (206,655,236)Cash and cash equivalents at beginning of year 346,827,554 553,482,790

Cash and cash equivalents at end of year 7 599,889,857 346,827,554


56


Financials


Notes to the consolidated financial statements

1. Corporate information and principal activities Aamal was formed on 13 January 2001 as a private shareholding company under the Commercial Registration Number 23245 in the State of Qatar. On 12 July 2007, the shareholders resolved to transform Aamal into a Qatari Public Shareholding Company (Q.P.S.C.) (the “Company” “Parent company). Accordingly, the Company was listed on Qatari Stock Exchange on 5 December 2007. The Company’s registered office is at P.O. Box 22477, Doha, State of Qatar.

The principal business activities of the Company and its subsidiaries (collectively the “Group”) are disclosed in note 2.2.4 of the consolidated financial statements.

The ultimate parent and controlling shareholder of the Company is Al Faisal Holding Company W.L.L..

The consolidated financial statements were authorised for issue by the representatives of the Board of Directors of Aamal Company Q.P.S.C. on 26 February 2019.

2. Basis of preparation and consolidationThe consolidated financial statements comprise the financial statements of Aamal Company Q.P.S.C. (the “Company”) and its subsidiaries.

2.1. Basis of preparation The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by International Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS.

The consolidated financial statements have been prepared under the historical cost convention, except for investment properties which have been measured at fair value.

The consolidated financial statements have been presented in Qatari Riyals (QR), which is the Group’s functional and presentation currency and have been rounded to the nearest Qatari Riyal.

The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to consolidated financial statements are disclosed in note 33.

2.1.1 New and amended standards adopted by the GroupA number of new or amended standards became applicable for the current reporting period and the Group had to change its accounting policies as a result of adopting the following standards:

– IFRS 9 Financial Instruments; – IFRS 15 Revenue from Contracts with Customers; – Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2; – Annual Improvements 2014-2016 cycle; – Transfers to Investment Property – Amendments to IAS 40; and – Interpretation 22 Foreign Currency Transactions and Advance Consideration .

2.1.2. New and amended standards and interpretations not yet adoptedIFRS 16, ‘leases’ was issued in January 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The accounting for lessors will not significantly change.

The Group assessed that the impact of adopting IFRS 16 is not significant as the Group’s non-cancellable operating lease commitments of QR 17,905,629 (see Note 24) are immaterial.

The Group will apply the standard from its mandatory adoption date of 1 January 2019. The Group intends to apply the simplified transition approach and will not restate comparative amounts for the year prior to first adoption. Right-of-use assets for property leases will be measured on transition as if the new rules had always been applied. All other right-of-use assets will be measured at the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease expenses).

There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

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2. Basis of preparation and consolidation continued

2.2. Principles of consolidation and equity accounting2.2.1 Business combinations(a) SubsidiariesSubsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group.

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

Acquisition-related costs are expensed as incurred.

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

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 either in profit or loss or as a change to other comprehensive income.

Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognised directly in the profit or loss.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs or group of CGUs that is expected to benefit from the synergies of the combination. Goodwill impairment testing is undertaken annually. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of profit or loss and other comprehensive income, changes in equity and financial position respectively.

(b) Changes in ownership interests in subsidiaries without change of controlTransactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Disposal of subsidiariesWhen the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

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Notes to the consolidated financial statements continued


2.2. Principles of consolidation and equity accounting continued2.2.2 AssociatesAssociates are all entities over which the Group has significant influence but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition.

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

The Group’s share of post-acquisition profit or loss is recognised in the consolidated statement of profit or loss and other comprehensive income, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognised in the Group’s consolidated financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

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

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

2.2.3 Joint arrangementsUnder IFRS 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. The Group has joint ventures.

A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Interests in joint ventures are accounted for using the equity method. Under the equity method, the interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income.

When the Group’s share of losses in a joint venture equals to or exceeds its interests in the joint ventures, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

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

The reporting dates of the equity-accounted investees and the Group are identical and the equity-accounted investees’ accounting policies conform to those used by the Group for like transactions and events in similar circumstances.

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2.2. Principles of consolidation and equity accounting continued2.2.4 Group companiesSet out below are the Group’s principal subsidiaries at 31 December 2018. Unless otherwise stated, the subsidiaries as listed below have share capital consisting solely of ordinary shares, which are held directly by the Group and the proportion of ownership interests held equals to the voting rights held by Group. The country of incorporation or registration is also their principal place of business:

The principal subsidiaries of the Group are as follows:

Group effective shareholding percentage

Name of the subsidiaryCountry of incorporation Principal activities 2018 2017

City Center Company W.L.L. Qatar Leasing the facilities of a retail outlet complex in City Center Doha 100% 100%Aamal Real Estate W.L.L. Qatar Residential and commercial real estate investment and property

rental100% 100%

Aamal Readymix W.L.L. Qatar Production and sale of readymix concrete 100% 100%Ebn Sina Medical W.L.L. Qatar Wholesale and retail distribution of pharmaceuticals and general

consumable products100% 100%

Aamal Medical W.L.L. Qatar Wholesale distribution of medical equipment 100% 100%Aamal Trading and Distribution Company

W.L.L.Qatar Sale of tyres, lubricants, batteries and home appliances 100% 100%

Aamal Services W.L.L. Qatar Providing facilities management and cleaning services 100% 100%Aamal Travel and Tourism W.L.L. Qatar Operating a travel agency 100% 100%Foot Care Center W.L.L. Qatar Sale of footwear, clinical activities and general commercial trading

products100% 100%

Ebn Sina Health Care Pharmacy Solutions W.L.L.

Qatar Sale of pharmaceuticals, baby care products, medicine and general consumable products

100% 100%

Aamal Cement Industries W.L.L. Qatar Development and management of factories and the production of curb stone, interlock slabs and cement bricks

99% 99%

IMO Qatar Company W.L.L. Qatar Construction and repair of power plant, establishment and management of industrial enterprises and acting as a representative for the international companies

100% 100%

Ci-San Trading W.L.L. Qatar Holding company of Gulf Rocks.The Group controls Ci-San Trading W.L.L. by virtue of a shareholders’ agreement

50% 50%

Gulf Rocks Company W.L.L. Qatar Retail distribution of aggregates 74.5% 74.5%Aamal Maritime Transportation W.L.L. Qatar Purchasing and leasing of ships for transportation of goods 74.7% 74.7%Al Farazdaq Company W.L.L. Qatar Trading of office supplies and providing printing and laminating

services65% 65%

Family Entertainment Center Company W.L.L.

Qatar Providing family entertainment park facilities in City Center Doha Mall 100% 100%

Winter Wonder Land W.L.L. Qatar Providing entertainment facilities in City Center Doha Mall 100% 100%Ecco Gulf Company W.L.L. Qatar Offers professional and business process outsourcing and call centre

services51% 51%

Aamal for Industrial Projects W.L.L. Qatar Industrial investments 100% 100%Legend Trading and Distribution W.L.L. Qatar Trading of automobile products 100% 100%Aamal for Car Maintenance W.L.L. Qatar Trading of car spare parts 100% 100%Innovative Lighting W.L.L.* Qatar Trading of Light Emitting Diode (LED) Lamps and other lighting

products70% 70%

Johnson Controls Qatar W.L.L.* Qatar Provision of facilities management services, energy services, and building maintenance and cleaning services to corporate clients

51% 51%

Aamal Optical Supplies W.L.L.* Qatar Trading of optical supplies 51% 51%

* These entities are under liquidation.

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2.2. Principles of consolidation and equity accounting continuedDetails of the equity-accounted investees of the Group are as follows:

Proportion of ownership and voting power held by the Group

Company nameCountry of incorporation Principal activity 2018 2017

Joint venturesSenyar Industries Qatar Holding W.L.L. Qatar Owning of patents, businesses and subletting them and provision of

investment portfolio management for its subsidiaries and associates50% 50%

Advanced Pipes and Casts Industries W.L.L.

Qatar Manufacturing of wide cement and glass reinforced pipes systems for infrastructure and pipeline projects

50% 50%

Aamal ECE W.L.L.* Qatar Property management 51% 51%AssociateFrijns Structural Steel Middle East W.L.L. Qatar Steel fabrications 20% 20%

* Whilst the Parent Company’s ownership proportion in Aamal ECE W.L.L. is 51%, the joint venture agreement between the Company and ECE Projekt management indicates joint control and hence, the investment is equity-accounted by the Parent Company.

2.3. Foreign currency translation2.3.1 Functional and presentation currency Items included in the consolidated financial statements are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Qatari Riyal which is the Parent Company, all subsidiaries and all equity accounted investees’ functional and presentation currency.

2.3.2 Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of profit or loss and other comprehensive income. All foreign exchange gains and losses are presented in the consolidated statement of profit or loss and other comprehensive income within ‘other income’.

2.4. Investment propertiesLand and buildings are considered as investment properties only when they are being held to earn rentals or for capital appreciation or for both.

Investment properties are measured initially at cost, including transaction costs and borrowing costs that are directly attributable to construction of the asset. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the consolidated statement of profit or loss and other comprehensive income in the year in which they arise.

Investment properties are de-recognised when either they have been disposed off or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the consolidated statement of profit or loss and other comprehensive income in the year of retirement or disposal.

Property under construction is dealt with under IAS 40 and recorded at cost less accumulated impairment losses until either its fair value becomes reliably determinable or construction is completed (whichever is earlier). At that time, it is reclassified as investment property and a fair value adjustment is recognised in the consolidated statement of profit or loss and other comprehensive income.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, the difference between the carrying value and the fair value at the date of transfer is recognised as a revaluation reserve in the equity and is released to the consolidated statement of profit or loss and other comprehensive income upon disposal of such property.


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2.5. Property, plant and equipmentProperty, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items cost including borrowing costs that are eligible for capitalisation and excluding the costs of day-to-day servicing, less accumulated depreciation and any impairment in value. 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 derecognised. All other repairs and maintenance are charged to the consolidated statement of profit or loss and other comprehensive income during the financial period in which they are incurred.

From time to time, the Group’s vessels are required to be dry-docked for inspection and re-licensing at which time major repairs and maintenance that cannot be performed while the vessels are in operation are generally performed. The Group capitalises the costs associated with dry-docking as they occur by adding them to the cost of the vessel and amortises these costs on the straight-line basis over 3-5 years, which is generally the period until the next scheduled dry-docking.

Depreciation is provided on a straight-line basis on all property, plant and equipment. The rates of depreciation are based upon the following estimated useful lives:

Buildings 20 – 25 yearsLeasehold improvements 2 – 8 years or over the period of lease term, whichever is shorterTruck mixers and motor vehicles 4 – 15 yearsPlant and machinery 8 – 25 yearsFurniture, fixtures and office equipment 3 – 5 yearsVessels 20 years

Construction work in progress is not depreciated.

The carrying amounts are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the consolidated statement of profit or loss and other comprehensive income in the year the asset is derecognised.

The asset’s residual values, useful lives and method of depreciation are reviewed, and adjusted if appropriate, at each financial year end.

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.

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

2.6. Cash and cash equivalentsFor the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and bank balances, unrestricted balances held with banks and short term bank deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

2.7. Trade and other receivablesTrade and other receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and therefore are all classified as current.

Trade receivables are recognised initially at amount of consideration that is conditional unless they contain significant financing components, when they are recognised at fair value. The Group holds the receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using effective interest method less loss allowance. See note 31.1(b) for a description of the Group’s impairment policies.

2.8. InventoriesRaw materials, work in progress, finished goods and goods for resale are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

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2.9. Contributed equityOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any Group company purchases the company’s equity instruments, for example as the result of a share buy-back or a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owners of the Group as treasury shares until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the shareholders of the Group.

2.10. Treasury sharesWhen share capital recognised in equity is repurchased (by the Company or any of its subsidiaries), the amount of the consideration paid, which includes directly attributable costs, is recognised as a deduction from equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in the retained earnings.

2.11. BorrowingsBorrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are derecognised from the consolidated statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the statement of profit or loss and other comprehensive income as other income or finance costs.

Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised in the statement of profit or loss and other comprehensive income, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

2.12. Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the year these are incurred. Borrowing costs consist of the interest and other costs that the Group incurs in connection with the borrowing of funds.

2.13. Accounts payable and accrualsTrade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.14. Tenant deposits Tenant deposit liabilities are initially recognised at fair value and subsequently measured at amortised cost where material. Any difference between the initial fair value and the nominal amount is included as a component of rental income and recognised on a straight-line basis over the lease term.

2.15. Financial assets2.15.1 ClassificationFrom 1 January 2018, the Group classifies its financial assets as those to be measured at amortised cost.

The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.

The Group reclassifies debt investments when and only when its business model for managing those assets changes.


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2.15. Financial assets continued2.15.2 Recognition and derecognitionRegular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

2.15.3 MeasurementAt initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Debt instrumentsSubsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories. The Group classifies all their debt instruments into the amortised cost category.

– Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses), together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss and other comprehensive income.

– FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are included within the general and administrative expenses in the statement of profit or loss and other comprehensive income.

– FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.

2.15.4 Impairment From 1 January 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by IFRS 9 for trade receivables and other contract assets, which requires expected lifetime losses to be recognised from initial recognition of the receivables, see note 31.1(b) for further details.

2.15.5 Accounting policies applied until 31 December 2017The Group has applied IFRS 9 retrospectively, but has elected not to restate comparative information. As a result, the comparative information provided continues to be accounted for in accordance with the Group’s previous accounting policy.

ClassificationUntil 31 December 2017, the Group classified its financial assets into ‘loans and receivables’ category.

The classification depends on the purpose for which the financial assets were acquired. Management determined the classification of its financial assets at initial recognition.

(a) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’, ‘amounts due from related parties’, ‘retention’ and ‘cash at banks’ in the consolidated statement of financial position.

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2.15. Financial assets continuedReclassificationThe Group could choose to reclassify a non-derivative trading financial asset out of the held for trading category if the financial asset was no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables were permitted to be reclassified out of the held for trading category only in rare circumstances arising from a single event that was unusual and highly unlikely to recur in the near term. In addition, the Group could choose to reclassify financial assets that would meet the definition of loans and receivables out of the held for trading or available-for-sale categories if the Group had the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification.

Reclassifications were made at fair value as of the reclassification date. Fair value became the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date were subsequently made. Effective interest rates for financial assets reclassified to loans and receivables and held-to-maturity categories were determined at the reclassification date. Further increases in estimates of cash flows adjusted effective interest rates prospectively.

MeasurementThe measurement at initial recognition did not change on adoption of IFRS 9.

At initial recognition, the Group measured a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that were directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss were expensed in the statement of profit or loss and other comprehensive income.

Loans and receivables were subsequently carried at amortised cost using the effective interest method.

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

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

For loans and receivables category, the amount of the loss was measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset was reduced and the amount of the loss was recognised in the consolidated statement of profit or loss and other comprehensive income.

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

2.16. ProvisionsProvisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

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

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


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2.17. Employees’ end of service benefits2.17.1 Defined benefit planA defined benefit plan is a pension plan made in accordance with the Qatar Labour Law number 14 of 2004, where the Group makes payments to non-Qatari employees on their retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the consolidated statement of financial position in respect of employees’ end of service indemnity is the present value of the defined benefit obligation at the end of the reporting period. The defined benefit obligation is calculated annually by management using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related benefit obligation. Where there is no deep market in such bonds, the market rates on government bonds are used.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions (remeasurements) are charged or credited to equity in other comprehensive income in the period in which they arise.

Past-service costs are recognised immediately in the consolidated statement of profit or loss and other comprehensive income.

2.17.2 Other short-term employees benefitsShort-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be measured reliably.

2.18. Revenue The IASB has issued a new standard for the recognition of revenue. This has replaced IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard permits either a full retrospective or a modified retrospective approach for the adoption. The Group applied modified retrospective approach for the adoption and assessed that the impact was immaterial, see note 3(b) for further details.

(i) Sale of goods manufactured by the GroupThe Group manufactures and sells ready mix concrete, curb stone, interlock slabs and cement bricks. Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

(ii) Sale of goods The Group operates wholesale and retail distribution of pharmaceuticals and general consumable products, wholesale distribution of medical equipment, retail sale of tyres, lubricants, batteries, home appliances, footwear, general commercial trading products, baby care products, medicine and general consumable products, aggregates, office supplies, automobile products and car spare parts. Revenue from the sale of goods is recognised when a Group entity sells a product to the customer.

Payment of the transaction price is due within 30 to 60 days when the customer purchases the goods. It is the Group’s policy to sell its products to the end customer with right of return. Therefore, a refund liability (included in trade and other payables) and a right to the returned goods (included in other current assets) are recognised for the products expected to be returned. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level (expected value method). Because the number of products returned has been steady for years, it is highly probable that a significant reversal in the cumulative revenue recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date.

(iii) Rendering of servicesThe Group provides various services including installation of medical equipment, clinical activities, family entertainment park facilities, facilities management and cleaning services, business process outsourcing and call centre services and printing and lamination services. The Group also operates a travel agency and performs construction and repair of power plant. It is involved in the establishment and management of industrial enterprises and acts as a representative for the international companies.

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2.18. Revenue continuedRevenue from providing services is recognised in the accounting period in which the services are rendered. Revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided, because the customer receives and uses the benefits simultaneously. For cleaning services and call centre services, this is determined based on the actual labour hours spent relative to the total expected labour hours.

Some contracts include multiple deliverables, such as selling and installation of medical equipment. However, the installation is simple, does not include an integration service and could be performed by another party. It is therefore accounted for as a separate performance obligation. In this case, the transaction price will be allocated to each performance obligation based on the stand-alone selling prices. Where these are not directly observable, they are estimated based on expected cost plus margin. Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

In case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by the Group exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised. If the contract includes an hourly fee, revenue is recognised in the amount to which the Group has a right to invoice. Customers are invoiced on a monthly basis and consideration is payable when invoiced.

(iv) Financing componentsThe Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.

2.19. Fair value measurementFair value is 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 fair value measurement is based on the presumption that:

– In the principal market for the asset or liability; or – In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

– Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities – Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable – Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Group measures its investment properties at fair value at each reporting date.

The Group’s management determines the policies and procedures for valuation of investment properties. External valuers are involved for the valuation of investment properties. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The management discusses and reviews, the Group’s external valuers, valuation techniques and assumptions used for each property (note 5).


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3. Changes in accounting policiesThis note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on the Group’s consolidated financial statements.

3(a) IFRS 9 Financial InstrumentsIFRS 9 replaces the provisions of IAS 39, that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting.

The adoption of IFRS 9 Financial Instruments from 1 January 2018 resulted in changes in accounting policies and adjustments to the amounts recognised in the consolidated financial statements. The new accounting policies are set out in note 2.15 above. In accordance with the transitional provisions in IFRS 9 (7.2.15) and (7.2.26), comparative figures have not been restated.

The total impact on the Group’s retained earnings from the adoption of IFRS 9 as at 1 January 2018 is as follows:

2018

Closing total equity as at 31 December 2017 – IAS 39 8,046,544,673Increase in provision for financial assets (42,854,749)Increase in provision for financial assets of associates and joint ventures (8,224,213)

Adjustment to retained earnings from adoption of IFRS 9 on 1 January 2018 (51,078,962)

Opening total equity at 1 January 2018 – IFRS 9 (before adjustment for IFRS 15) 7,995,465,711

(i) Classification and measurementOn 1 January 2018 (the date of initial application of IFRS 9), the Group’s management has assessed which business models apply to the financial assets held by the Group and ensured its financial instruments were classified into the appropriate IFRS 9 categories. No reclassification resulted from the implementation of IFRS 9.

(ii) Impairment of financial assetsThe Group has the following financial assets that are subject to IFRS 9’s new expected credit loss model:

– Trade and retention receivables – Other receivables – Amounts due from related parties – Cash in banks

The Group was required to revise its impairment methodology under IFRS 9 for each of these classes of assets.

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.

Trade and retention receivablesThe Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and retention receivables.

To measure the expected credit losses, trade receivables and retention receivables have been grouped based on shared credit risk characteristics and the days past due. The retention receivables relate to the billed works which were held by the customer until the defect period is over and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets with the presumption that default does not occur later than when a financial asset is 90 days past due.

On that basis, the loss allowance as at 1 January 2018 was determined as follows for both trade receivables and retention receivables:

1 January 2018 Expected Loss rate Gross Carrying Amount Loss Allowance

Current 2% 284,527,686 (5,580,376)More than 90 but less than 180 days past due 15.2% 54,152,705 (8,207,408)More than 180 but less than 270 days past due 54.7% 22,053,843 (12,061,005)More than 270 days past due 73.9% 80,688,820 (59,630,333)

Total 441,423,054 (85,479,122)

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3. Changes in accounting policies continued

3(a) IFRS 9 Financial Instruments continuedThe loss allowances for trade and retention receivables as at 31 December 2017 reconcile to the opening loss allowances on 1 January 2018 as follows:

Total

At 31 December 2017 – IAS 39 42,624,373Adjustments through opening retained earnings 42,854,749

Opening loss allowance as at 1 January 2018 – IFRS 9 85,479,122

The loss allowance increased by a further QR 42,854,749 to reach QR 85,479,122 for both trade and retention receivables as at 1 January 2018.

Trade receivables and retention receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group.

Other financial assets at amortised cost Other financial assets at amortised cost include other receivables, amount due from related parties and cash and cash equivalents. The result of applying the expected credit risk model is immaterial and hence the Group has not passed any adjustment to the opening retained earnings at 1 January 2018.

The following table shows the summary of adjustments recognised for each individual item. The adjustments are analysed as follows:

Categories of Financial Assets

Balance as at 31 December 2017 ECL Assessment

Balance as at 1 January 2018

A) Bank balances (excluding cash on hand) 349,723,280 – 349,723,280 B) Trade and Retention receivables 398,798,681 (42,854,749) 355,943,932 C) Other receivables 17,361,568 – 17,361,568D) Due from related parties (excluding advances to ultimate parent) 33,131,332 – 33,131,332

Total 799,014,861 (42,854,749) 756,160,112

Total impact on the Group’s opening retained earnings (42,854,749)

No changes to the consolidated statement of profit or loss resulted from the adoption of the new standard.

3(b) IFRS 15 Revenue from Contracts with CustomersThe Group has adopted IFRS 15 ‘Revenue from Contracts with Customers’ with effect from 1st January 2018, which resulted in changes in accounting policies. The new accounting policies are set out in note 2.18 above. The adoption of IFRS 15 did not result in changes to the amounts recognised in the consolidated financial statements. In accordance with the transition provisions in IFRS 15, the Group has adopted the new rules retrospectively but no restatement was done to the comparative figures for the year 2017.

Management has assessed the effects of applying the new standard on the Group’s consolidated financial statements and has identified that the recognition and measurement of revenue for all the current ongoing contracts under the IFRS 15 five-step model will not change as currently recognised under IAS 18.

As most of the Group’s outstanding revenue contracts comprise mainly from one performance obligation, and revenue recognition criteria meets the recognition at point in time criteria, the Group assessed that there is no material impact on the revenue recorded from the existing revenue contracts.

Consolidated impact of IFRS 9 and 15 adoption through opening retained earnings is as follows:

2018

IFRS 9 adjustment 51,078,962IFRS 15 adjustment 5,824,520

56,903,482


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4. Equity-accounted investeesThe entities listed below have share capital consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also the principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.

% of ownership

Name of entity Place of business 2018 2017 Nature of relationship 2018 2017

Frijns Structural Steel Middle East W.L.L. Qatar 20% 20% Associate 10,111,763 14,864,935Aamal ECE W.L.L. Qatar 51% 51% Joint Venture 5,563,066 5,613,301Advanced Pipes and Casts Industries W.L.L. Qatar 50% 50% Joint Venture – 5,276,848Senyar Industries Qatar Holding W.L.L. Qatar 50% 50% Joint Venture 308,449,705 310,308,268

324,124,534 336,063,352

Summarised financial information of equity-accounted investees:

Reconciliation to carrying amounts

Aamal ECE W.L.L.

2018

Frijns Structural Steel Middle East

W.L.L.2018

Advanced Pipes and Casts Industries

W.L.L.2018

Senyar Industries Qatar Holding

W.L.L.2018

Total2018

Opening net assets 11,006,472 74,324,677 10,553,695 620,616,535 716,501,379Profit (loss) for the period/year 10,607,974 16,638,282 (14,549,778) 189,501,300 202,197,778Dividends paid (10,706,473) – – (184,914,726) (195,621,199) Impact of adoption of IFRS 9 – (38,182,142) – (1,175,570) (39,357,712)Impact of adoption of IFRS 15 – – – (11,649,041) (11,649,041)Other adjustments – (2,222,001) – 4,520,911 2,298,910

Closing net assets 10,907,973 50,558,816 (3,996,083) 616,899,409 674,370,115Group share in % 51% 20% 50% 50%Group share 5,563,066 10,111,763 – 308,449,705 324,124,534

Carrying amount 5,563,066 10,111,763 – 308,449,705 324,124,534

Group share in profit (loss) including other adjustments 5,410,066 2,883,256 (5,276,848) 97,011,106 100,027,580

2017 2017 2017 2017 2017

Opening net assets 12,647,513 62,858,380 – – 75,505,893Net assets at fair value arising from deconsolidation due to loss

of control of subsidiary – – 17,000,000 672,226,928 689,226,928Profit (loss) for the period/year 10,706,472 10,442,315 (6,446,305) 194,989,607 209,692,089Dividends paid (12,347,513) – – (246,600,000) (258,947,513)Other adjustments – 1,023,982 – – 1,023,982

Closing net assets 11,006,472 74,324,677 10,553,695 620,616,535 716,501,379Group share in % 51% 20% 50% 50%Group share 5,613,301 14,864,935 5,276,848 310,308,268 336,063,352

Carrying amount 5,613,301 14,864,935 5,276,848 310,308,268 336,063,352

Group share in profit (loss) including other adjustments 5,460,300 2,293,259 (3,223,152) 97,494,803 102,025,210

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4. Equity-accounted investees continued

Summarised statement of financial position

Aamal ECE W.L.L.31 December

2018

Frijns Structural Steel Middle East W.L.L.

31 December2018


31 December2018

Senyar IndustriesQatar Holding W.L.L.

31 December2018

Current assets 12,238,392 99,262,718 40,106,214 426,201,614 Non-current assets 8,322 48,747,714 151,578,311 1,101,890,953 Current liabilities (1,281,859) (70,313,087) (112,903,790) (854,731,824) Non-current liabilities (56,882) (39,138,529) (88,952,007) (10,411,179) Non-controlling interest – – – (68,023,893)

Net assets 10,907,973 38,558,816 (10,171,272) 594,925,671

31 December2017

31 December2017

31 December2017

31 December2017

Current assets 14,089,273 174,573,183 20,127,205 316,887,175Non-current assets 15,185 52,751,092 158,611,410 1,304,114,152Current liabilities (3,035,858) (108,544,390) (80,980,797) (950,741,423)Non-current liabilities (62,128) (44,455,208) (92,671,425) (9,022,974)Non-controlling interest – – – (78,765,014)

Net assets 11,006,472 74,324,677 5,086,393 582,471,916

Summarised statement of profit or loss and other comprehensive income

Aamal ECE W.L.L.2018

Frijns Structural Steel Middle East W.L.L.

2018


2018

Senyar IndustriesQatar Holding W.L.L.

2018

Revenue 13,132,009 195,429,950 49,553,842 2,220,914,994 Direct costs – (100,146,294) (53,781,335) (1,933,450,365)

Gross profit/(loss) 13,132,009 95,283,656 (4,227,493) 287,464,629 Other income 3,946 714,482 – 1,656,251 General expenses (2,527,981) (78,079,225) (3,795,321) (38,198,741) Finance costs – (1,280,631) (6,526,964) (35,410,071)

Net profit/(loss) 10,607,974 16,638,282 (14,549,778) 215,512,068

Other comprehensive income – – – –

Total comprehensive income/(loss) 10,607,974 16,638,282 (14,549,778) 215,512,068

2017 2017 2017 2017

Revenue 14,588,970 172,964,767 33,054,645 2,179,649,512Direct costs – (132,374,031) (35,698,197) (1,856,056,005)

Gross profit/(loss) 14,588,970 40,590,736 (2,643,552) 323,593,507Other income – 2,855,651 – 1,591,059General expenses (3,900,274) (31,725,722) (3,299,787) (34,361,243)Finance costs – (1,278,350) (5,278,093) (20,561,520)

Net profit/(loss) 10,688,696 10,442,315 (11,221,432) 270,261,803

Other comprehensive income 17,776 – – –

Total comprehensive income/(loss) 10,706,472 10,442,315 (11,221,432) 270,261,803


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5. Investment properties

2018 2017

At 1 January 6,892,214,727 6,899,679,999Additions 276,375,007 51,169,919Net transfers to property, plant and equipment (Note 6) – (58,635,191)

At 31 December 7,168,589,734 6,892,214,727

– Investment properties are located in the State of Qatar. The Group has no restrictions on the realisability of its investment properties and no contractual obligations to either purchase investment properties or repairs, maintenance and enhancements.

– The investment properties are stated at fair value, which has been determined based on valuations performed by independent valuers as at 31 December 2018. Those valuers are accredited with recognised and relevant professional qualifications and with recent experience in the location and category of those investment properties being valued. In arriving at estimated market values, the valuers have used their market knowledge and professional judgement and not only relied on historical transactional comparable. In the absence of current prices in an active market, the valuations are based on investment, comparable, and depreciated replacement cost (DRC) method with inputs based upon comparable market transactions on arm’s length terms.

– Investment properties are measured at fair value using significant unobservable inputs (Level 3).

Details of the Group’s investment properties and information about the fair value hierarchy as at 31 December are as follows:

2018 2017

Vacant land 134,334,955 128,500,000Completed properties:Commercial properties 4,220,798,950 4,129,112,517Residential properties 806,284,145 727,927,500Mixed (residential and commercial) 1,748,970,000 1,744,373,500Properties under construction 258,201,684 162,301,210

Total at 31 December 7,168,589,734 6,892,214,727

Movement in properties under construction is as follows:

2018 2017

Beginning at 1 January 162,301,210 72,378,999Additions during the year 81,610,393 51,169,919Borrowing costs capitalised during the year 14,290,081 –Transfers from capital work in progress (Note 6) – 38,752,292

Ending at 31 December 258,201,684 162,301,210

Description of valuation techniques used by the Group and key inputs to valuation on all of the investment properties are as follows:

Types of properties Valuation techniques Estimated value

Commercial Market approach 2,750 to 3,250 QR/sqft Land rateproperties Depreciated replacement cost 2,375 to 4,375 QR Depreciated rebuild rate

Residential Market approach 420–2,200 QR Land rateproperties Depreciated replacement cost 2,156–5,319 QR Depreciated rebuild rate

Vacant land Market approach 575 to 800 QR/sqft Land rate

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Financials


5. Investment properties continued

Sensitivity analysis:At 31 December 2018, if the price per square foot for investment properties (valued using market approach) had been higher/lower by 1% with all other variables held constant, the calculated fair valuation gains (losses) on investment properties for the year would have been QR 71,686 thousands lower/higher (higher/lower) mainly as a result of higher/lower fair value gain (loss) on investment properties.

Minimum lease receivables under non-cancellable operating leases of investment properties not recognised in the consolidated financial statements are as follows:

2018 2017

Within one year 164,629,757 157,412,559Between 1 and 5 years 369,662,736 398,707,393More than 5 years – 19,911,449

Total at 31 December 534,292,493 576,031,401

Amounts recognised in profit or loss for investment properties are as follows:

2018 2017

Rental income 270,849,228 304,623,517Direct operating expenses from properties that generated rental income 38,395,504 36,919,712Fair value gain/(loss) recognised – –

6. Property, plant and equipment

Buildings and leasehold

improvements

Truck mixersand motor

vehiclesPlant and

machinery

Furniture,fixtures and

officeequipment Vessels

Capital workin progress Total

Cost:At 1 January 2018 159,202,517 124,138,809 139,569,286 53,184,775 73,507,640 5,028,627 554,631,654 Additions 505,780 327,000 3,122,582 2,562,414 – 6,684,390 13,202,166Disposals/write-off (172,205) (59,500) (400,603) (136,279) – (77,746) (846,333)Transfer from capital work in

progress 2,844,520 393,750 – – – (3,238,270) –Transfer to related parties – 139,350 – (118,154) – – 21,196

At 31 December 2018 162,380,612 124,939,409 142,291,265 55,492,756 73,507,640 8,397,001 567,008,683

Accumulated depreciation:At 1 January 2018 36,353,626 65,475,768 77,768,717 40,355,330 4,369,178 – 224,322,619 Charge for the year 4,556,497 8,362,253 7,963,322 4,727,115 1,755,517 – 27,364,704 Disposals/write-off (48,630) (31,733) (400,602) (131,692) – – (612,657)Transfer to related parties – 139,350 – (117,457) – – 21,893

At 31 December 2018 40,861,493 73,945,638 85,331,437 44,833,296 6,124,695 – 251,096,559

Net carrying amounts:At 31 December 2018 121,519,119 50,993,771 56,959,828 10,659,460 67,382,945 8,397,001 315,912,124

Notes:(i) Depreciation charge for the year amounting to QR 17,330,577 (2017: QR 26,801,233) is included in the direct costs.(ii) The capital work in progress does not include capitalised borrowing in the current year (2017: Nil).(iii) The buildings are constructed on a plot of land taken on a long term operating lease.


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6. Property, plant and equipment continued

Buildings and leasehold

improvements

Truck mixersand motor

vehiclesPlant and

machinery

Furniture,fixtures and

office equipment VesselsCapital work

in progress Total

Cost:At 1 January 2017 287,748,702 140,586,880 411,998,358 52,076,166 73,507,640 21,918,335 987,836,081Additions 2,926,382 4,632,653 8,506,483 10,665,977 – 28,571,229 55,302,724Disposals of subsidiaries (228,860,050) (14,263,532) (277,416,556) (8,447,054) – (6,349,517) (535,336,709)Disposals/write-off – (6,817,192) (3,878,127) (1,110,314) – – (11,805,633)Transfer from investment

properties (Note 5) 97,387,483 – – – – – 97,387,483Transfer from capital work in

progress (Note 5) – – 359,128 – – (39,111,420) (38,752,292)

At 31 December 2017 159,202,517 124,138,809 139,569,286 53,184,775 73,507,640 5,028,627 554,631,654

Accumulated depreciation:At 1 January 2017 82,386,089 70,133,613 190,735,846 42,534,795 2,300,258 – 388,090,601Charge for the year 7,510,051 8,826,242 14,235,116 4,059,615 2,068,920 – 36,699,944Disposals of subsidiaries (53,542,514) (7,051,094) (123,899,822) (5,141,035) – – (189,634,465)Disposals/write-off – (6,432,993) (3,302,423) (1,098,045) – – (10,833,461)

At 31 December 2017 36,353,626 65,475,768 77,768,717 40,355,330 4,369,178 – 224,322,619

Net carrying amounts:At 31 December 2017 122,848,891 58,663,041 61,800,569 12,829,445 69,138,462 5,028,627 330,309,035

Significant estimate – useful lives of property, plant and equipmentThe Group’s management determines the estimated useful lives of its property, plant and equipment for calculating depreciation as outlined in note 2.5. This estimate is determined after considering the expected usage of the asset, physical wear and tear, technical or commercial obsolescence. The estimated useful lives, residual values and depreciation methods are reviewed at each reporting date, with the effect of any changes in estimate accounted for on a prospective basis. At year-end, management assessed that no changes occurred to these estimates.

At year-end, if the useful life increased/decreased by 5% against the current useful life with all other variables held constant, profit for the year would have been lower by QR 2,958,838 or higher by QR 2,677,044 (2017: lower by QR 2,676,872 or higher by QR 2,421,932).

7. Cash and bank balances For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise the following balances:

2018 2017

Cash on hand 33,611 24,274Cash in banks – current accounts 466,888,410 240,043,597Cash in banks – call accounts 124,694,889 98,643,452Short term fixed deposits 8,272,947 8,116,231Restricted deposits relating to letters of guarantee 6,005,191 2,920,000

Cash and bank balances 605,895,048 349,747,554Restricted deposits relating to letters of guarantee (6,005,191) (2,920,000)

599,889,857 346,827,554

The short term bank deposits are made for varying periods between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short term deposit rates.

Cash is held in banks with reputable credit ratings as follows:

Credit rating Rating Agency 2018 2017

P-1 Moody’s 510,702,323 309,966,179P-2 Moody’s 90,959,822 38,586,640Others Moody’s 4,199,292 –Unrated – – 1,170,461

605,861,437 349,723,280

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8. Trade and other receivables

2018 2017

Trade receivables 384,476,675 422,473,070Less: Impairment of trade receivables (88,266,099) (42,624,373)

296,210,576 379,848,697Advances to suppliers and prepayments 56,246,211 63,663,889Retention receivables 8,862,343 9,481,003Other receivables 43,835,024 17,361,568

405,154,154 470,355,157

The total retention receivables as at 31 December is as follows:

2018 2017

Current portion 8,862,343 9,481,003 Non-current portion 6,036,326 9,468,981

14,898,669 18,949,984

As at 31 December 2018, trade receivables amounting to QR 88,266,099 (2017: QR 42,624,373) were impaired. Movements in the allowance for impairment of trade accounts receivable were as follows:

2018 2017

At 31 December 2017 – IAS 39 42,624,373 31,750,735Adjustments through opening retained earnings 42,854,749 –

Opening loss allowance as at 1 January 2018 – IFRS 9 85,479,122 31,750,735Charges net of recoveries for the year 2,997,706 13,768,958Amounts written-off (210,729) (2,895,320)

At 31 December 88,266,099 42,624,373

Information about the impairment on trade receivables can be found in note 31.

9. Amounts due from related parties

2018 2017

Ultimate parentAl Faisal Holding Company W.L.L. 12,892,639 101,646,435

Entities controlled by ultimate parentAl Rayyan Tourism Investment Company W.L.L. 6,809,985 8,161,084Maintenance Management Group Qatar W.L.L. 405,696 926,947Al Jazi Real Estate Investment Company W.L.L. – 777,562Al-Arabia Land Transporting Company W.L.L. 295,110 230,865Al Farman for Investment & International Trading Company W.L.L. 482,855 173,235Gulf English School 148,681 82,277Deliopolis W.L.L. – 1,965Other related parties 2,176,110 4,255,917

10,318,437 14,609,852Joint ventureAdvanced Pipes and Casts Company W.L.L. 25,752,749 18,521,480

48,963,825 134,777,767


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9. Amounts due from related parties continuedTransactions with related parties included in the consolidated statement of profit or loss and other comprehensive income were as follows:

2018 2017

Sale of goods and services to:Ultimate parent 12,018,915 3,382,384Entities controlled by ultimate parent 14,221,565 9,674,535Associate 2,915,403 –

29,155,883 13,056,919

Rental income from:Ultimate parent 398,400 398,400Entities controlled by ultimate parent 154,373 174,000

552,773 572,400

Notes:(i) Transactions with related parties are carried out through open account and Directors do not consider any receivables to be past due or impaired.(ii) Other related party transactions are disclosed in Note 26.

10. Inventories

2018 2017

Goods for resale 158,615,550 131,943,113Raw materials and spare parts 13,257,030 14,025,786Work in progress 664,715 750,681Goods in transit 1,531,613 1,531,613

174,068,908 148,251,193Less: write-down of inventories to net realisable value (2,589,956) (1,361,285)

171,478,952 146,889,908

Movements in the provision for obsolete and slow moving inventories were as follows:

2018 2017

At 1 January 1,361,285 2,818,074Charges net of reversals during the year (Note 18) 1,228,671 708,944Disposal of subsidiaries – (2,165,733)

At 31 December 2,589,956 1,361,285

Significant estimate – Write-down of inventories to net realisable valueInventories are stated at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and written down according to the inventory type and the degree of ageing or obsolescence, any difference between the amounts actually realised in future periods and the amounts expected will be recognised in the consolidated statement of profit or loss and other comprehensive income.

At year-end, if the estimate used by management increased/decreased by 1% with all other variables held constant, profit for the year would have been lower by QR 1,568,749 or higher by QR 519,724 (2017: lower by QR 1,359,229 or higher by QR 926,728).

11. Share capital

2018 2017

Authorised, issued and paid630,000,000 (2017: 630,000,000) shares of QR 10 each 6,300,000,000 6,300,000,000

All shares are of same class and carry equal voting rights.

The Board of Directors of Qatar Financial Markets Authority (“QFMA”) issued its resolution at its 4th meeting for the year 2018 held on 16th of December 2018, to reduce the nominal value of shares of listed companies in Qatar to be (1) one Qatari Riyal, so that each existing share will split into (10) ten shares.

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11. Share capital continuedTherefore, the Group is inviting for an Extraordinary General Meeting of Shareholders to approve the share split and amend the Article of Association in accordance with the said resolution.

11.1 Movement in treasury shares

Number of shares QR

Opening balance 1 January 2018 55,936 739,279Reissuance of treasury shares (55,936) (506,850)Loss on reissuance of treasury shares – (232,429)

Balance 31 December 2018 – –

12. Legal reserveIn accordance with the requirements of the Qatar Commercial Companies’ Law No. 11 of 2015 and the parent’s articles of association, an amount equal to 10% of the net profit for the year, as a minimum, should be transferred to legal reserve until this reserve is equal to 50% of the paid up share capital. The reserve is not available for distribution except in the circumstances stipulated in the above mentioned law and the parent’s articles of association.

13. Borrowings

Notes Maturity 2018 2017

Loan 1 (i) November 2023 406,944,694 –Loan 2 (ii) December 2022 193,562,353 –Loan 3 (iii) February 2018 – 220,000,000Loan 4 (iv) April 2019 3,880,483 11,641,448Loan 5 (v) May 2022 1,610,633 2,082,038

605,998,163 233,723,486Less: Deferred financing cost (5,444,694) –

600,553,469 233,723,486

Presented in the consolidated statement of financial position as follows:

2018 2017

Current portion 85,665,476 228,232,370Non-current portion 514,887,993 5,491,116

600,553,469 233,723,486

The deferred financing costs consist of arrangement fees. The movements in the deferred financing costs were as follows:

2018 2017

At 1 January – 404,276Recognised during the year 5,511,500 –Amortised during the year (Note 22) (66,806) (30,277)Disposal of subsidiaries – (373,999)

At 31 December 5,444,694 –

Notes:(i) Loan 1 represents a loan drawn down on 11 December 2018 to finance the working capital requirements and the investments of the Group. The loan is payable in 18 quarterly

instalments with effect from August 2019. The loan carries interest at commercial market rates. (ii) Loan 2 represents a loan drawn down on 10 January 2018 to finance the reconstruction and refurbishment of City Centre. The loan is payable in 17 quarterly instalments with

effect from 24 December 2018. The loan carries interest at commercial market rates. (iii) Loan 3 was obtained to settle an existing loan and working capital requirements of the Group. The loan carries interest at commercial rates and the loan was fully settled in 2018.(vi) Loan 4 was obtained on 04 May 2014, to finance the purchase of heavy equipment and machines. The loan is payable by 18 quarterly instalments with effect from 26 February

2015, previously QR 1,672,058 until June 2017 and revised to QR 1,940,241 until the last instalment in April 2019. The loan carries interest at commercial market rates.(v) Loan 5 was obtained on 12 July 2016, to finance the purchase of vehicles, plant and machinery. The loan is payable by 51 monthly instalments of QR 46,355 in the first month

with effect from 1 June 2017 and QR 39,284 in the subsequent months. The loan carries interest at commercial market rates.


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13. Borrowings continued

Net debt reconciliation

Cash/overdraft

Borrowings – due within

one year

Borrowings – due after

one year Total

Net debt as at 1 Jan 2018 346,827,554 (228,232,370) (5,491,116) 113,104,068Cash flows 253,062,303 142,566,894 (509,396,877) (113,767,680)

Net debt as at 31 Dec 2018 599,889,857 (85,665,476) (514,887,993) (663,612)

Cash/overdraft

Borrowings – due within

one year

Borrowings – due after

one year Total

Net debt as at 1 Jan 2017 553,482,790 (620,947,970) (130,827,739) (198,292,919)Cash flows (206,655,236) 151,994,511 – (54,660,725)De-recognition due to loss of control on subsidiaries – 240,721,089 125,336,623 366,057,712

Net debt as at 31 Dec 2017 346,827,554 (228,232,370) (5,491,116) 113,104,068

14. Employees’ end of service benefits Movements in the provision reflected in the consolidated statement of financial position were as follows:

2018 2017

At 1 January 25,259,237 31,502,689Provision made during the year (Note 21) 3,994,315 5,002,724Disposals of subsidiaries – (8,297,116)End of service benefits paid during the year (3,048,969) (2,949,060)

At 31 December 26,204,583 25,259,237

15. Accounts payable and accruals

2018 2017

Trade accounts payable 193,665,094 155,271,274Advances from customers and tenants 46,810,223 49,774,798Accruals 39,352,164 34,241,240Other payables 74,086,945 111,389,435

353,914,426 350,676,747

16. Amounts due to related parties

2018 2017

Entities controlled by ultimate parentGettco Company W.L.L. – Gettco Refrigeration and Air-conditioning 663,056 672,056Al Jazi Real Estate Investment Company W.L.L. 1,202,171 –Gettco Services – 579,081Integrated Information Systems W.L.L. 349,122 415,563Other related parties 7,318,125 2,765,445

9,532,474 4,432,145 Joint ventureAamal ECE L.L.C. 7,342,461 9,190,193

16,874,935 13,622,338

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16. Amounts due to related parties continuedTransactions with related parties included in the consolidated statement of profit or loss and other comprehensive income were as follows:

2018 2017

Purchase of investment properties from:Entity controlled by ultimate parent 179,500,000 –

Purchase of goods and services from:Entities controlled by ultimate parent 23,621,583 3,992,919

Rental expense:Ultimate parent 5,338,492 5,971,953Entities controlled by ultimate parent 2,536,654 4,316,883

7,875,146 10,288,836

Operator’s management feesJoint venture 13,132,008 14,588,970

Note:A joint venture manages the operations of City Centre Mall.Other related party transactions are disclosed in Note 26.

17. Revenues

Sale of goodsService income

Commission, incentives and agency fees

Rental Income Total

2018:At a point in time 827,166,060 28,512,965 55,319,378 – 910,998,403Overtime – 73,505,355 1,439,438 – 74,944,793Rental Income – – – 300,608,578 300,608,578

Total 827,166,060 102,018,320 56,758,816 300,608,578 1,286,551,774

2017: 1,137,565,873 116,023,222 46,024,829 304,623,517 1,604,237,441

18. Direct costs

2018 2017

Cost of inventories recognised as an expense 648,802,629 862,542,715Direct salaries and wages (Note 21) 61,698,258 69,383,122Depreciation (Note 6) 17,330,577 26,801,233Operator’s management fees 13,132,008 14,588,970Operating expenses on real estate properties 38,395,504 36,919,712Provision for obsolete and slow moving inventories (Note 10) 1,228,671 708,944Other operating expenses 38,768,152 47,698,995

819,355,799 1,058,643,691

19. Other income

2018 2017

Foreign exchange gain/(loss) 153,358 (255,231)Gain on disposal of property, plant and equipment – 1,591,661Miscellaneous income 11,261,513 19,549,392

11,414,871 20,885,822


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20. General and administrative expenses

2018 2017

Management and employees’ compensation (Note 21) 69,792,295 74,378,725Depreciation 10,034,127 9,898,711Rent 9,663,482 9,106,862Donations 7,817,765 9,479,531Insurance and professional fees 5,405,581 3,220,074Repairs and maintenance 2,831,214 2,021,420Communication costs 1,511,813 1,724,968Bank charges 1,143,982 1,478,345Postage, printing and stationery 1,168,727 923,068Training and business development 483,371 56,072Miscellaneous expenses 9,469,462 12,935,058

119,321,819 125,222,834

21. Staff costs

2018 2017

Salaries and wages 123,042,438 134,790,206Employees’ end of service benefits (Note 14) 3,994,315 5,002,724Other employee benefits 4,453,800 3,968,917

131,490,553 143,761,847

Staff costs are presented as follows:

2018 2017

Direct costs (Note 18) 61,698,258 69,383,122General and administrative expenses (Note 20) 69,792,295 74,378,725

131,490,553 143,761,847

22. Finance costs

2018 2017

Interest expense 2,406,073 18,325,699Amortisation of deferred financing costs (Note 13) 66,806 30,277

2,472,879 18,355,976

23. Basic and diluted earnings per share Basic earnings per share is calculated by dividing the profit for the year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

2018 2017

Profit for the year attributable to equity holders of the parent (QR) 445,270,636 500,916,782

Weighted average number of shares outstanding during the year(i) 630,000,000 629,897,032

Basic and diluted earnings per share (QR) 0.71 0.80

Notes:(i) The weighted average number of shares for the purpose of calculating earnings per share has been calculated as follows:

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23. Basic and diluted earnings per share continued

No. of shares outstanding Weighted average no. of shares

2018 2017 2018 2017

Outstanding shares, beginning of year 629,944,064 630,000,000 629,897,032 630,000,000Add: Reissuance of treasury shares at beginning of the year 55,936 – 102,968 –Less: average outstanding treasury shares – (55,936) – (102,968)

Average outstanding shares, end of year 630,000,000 629,944,064 630,000,000 629,897,032

As disclosed in note 11 to the consolidated financial statements, the Group will invite for an Extraordinary General Meeting of Shareholders to approve a share split with a ratio of 1:10. After the share split is approved, the number of shares will become 6,300,000,000 with a par value of (1) one Qatari Riyal each. Therefore, the earnings per share will become 0.07 and 0.08 for the years ended 31 December 2018 and 31 December 2017 respectively.

24. Commitments

2018 2017

Estimated capital expenditure approved and contracted for at the year-end but not provided for:Investment properties 127,459,819 166,680,958Property, plant and equipment 413,721 2,731,156

127,873,540 169,412,114

Operating lease commitments, under non-cancellable lease agreements:Payable within one year 8,915,025 9,678,559Payable after one year but not more than five years 8,990,604 4,291,141

17,905,629 13,969,700

25. Contingent liabilitiesThe Group had the following contingent liabilities from which it is anticipated that no material liabilities will arise.

2018 2017

Letters of guarantee 146,116,118 154,313,455

Letters of credit 23,313,124 9,349,460

Notes:(i) Letters of guarantee include performance, tender and bid bonds and payment guarantees given to suppliers and contractors by the Group in the ordinary course of business,

which will mature within twelve months from the reporting date. (ii) Letters of credit are provided by lodging documents to the bank for purchase of trading goods from foreign suppliers, which will mature within three to six months from the date

of the transaction.

26. Related party disclosure

A) Related party transactions Related parties represent major shareholders, directors and key management personnel of the Group, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group’s management.

B) Related party balancesAmounts due from and due to related parties are disclosed in Notes 9 and 16, respectively. These balances do not carry interest and are repayable on mutually agreed dates, generally within one year.

The Group did not record any impairment of receivables relating to amounts due from related parties in either year. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

C) Compensation of key management personnelThe remuneration of key management during the year was as follows:

2018 2017

Short-term benefits 1,320,000 1,020,000Employees’ end of service benefits 63,750 63,750

1,383,750 1,083,750


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26. Related party disclosure continued

D) Board of Directors remunerationRemuneration proposed for Board of Directors for the year amounts to QR 1,800,000 (2017: QR 1,200,000).

27. DividendsThe shareholders of the Company approved at the Annual General Meeting held on 22 April 2018 a cash dividend of 6% of the share capital amounting to QR 378 million from the profit of 2017 (2017: QR 378 million).

The Board of Directors proposed cash dividend of 6% of the share capital amounting to QR 378 million for the year 2018 which will be submitted for formal approval at the Annual General Assembly Meeting.

28. Contribution to social and sports fund During the year, the Group appropriated an amount of QR 11,131,766 (2017: QR 12,522,920) representing 2.5% of the consolidated net profit attributable for the equity holders of the parent for the year as a contribution to the Social and Sports fund.

29. Income taxCertain subsidiaries of the Group, which have non-GCC ownership, are subject to income tax under Qatar Income Tax Law No. 21 of 2009. The income tax is charged on the share of profits attributable to non-GCC shareholders. For the purpose of these consolidated financial statements, the income tax liability of the foreign shareholders has been excluded, given that the non-GCC shareholders have agreed, under the shareholder agreements signed with the Group, to bear the full liability and make necessary payments.

30. Segment informationFor management purposes, the Group is organised into business units based on their nature of activities and has four reportable segments as described below, which are the Group’s strategic divisions and the Head Office as follows:

Property:The segment involves leasing the facilities of retail outlet complex, real estate investments and property rental businesses.

Trading and distribution:The segment represents wholesale and/or retail distribution of pharmaceutical and consumable items, home appliances, medical equipment, tyres and lubricants and industrial printing.

Industrial manufacturing:The segment involves manufacturing, wholesale and/or retail distribution of electric cables and tools, aggregates, ready-mix concrete and cement blocks and provision of services in relation to industrial investment, repair and construction of power plants, trading of LED lighting products and management of industrial enterprises.

Managed services:The segment involves provision of housekeeping and cleaning services, entertainment and amusement services, call center services and acting as travel agents.

Parent company:It provides corporate services to the subsidiaries of the Group.

For each of the strategic divisions, the Group’s managing director (the chief operating decision maker) reviews internal management reports on a regular basis. The managing director monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on the financial position and operating profit or loss of these segments. Transfer pricing between operating segments are on arm’s length basis in a manner similar to transactions with third parties.

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Financials


30. Segment information continued

30.1 Operating segments:The operating segment, after elimination of inter-company transactions, is presented as follows:

PropertyTrading and distribution

Industrial manufacturing

Managedservices

ParentCompany Eliminations Total

For the year ended 31 December 2018Revenues- External parties 287,651,851 690,699,862 219,668,648 88,531,413 – – 1,286,551,774- Inter-segments(i) 7,763,332 5,714,283 10,799,034 8,134,399 – (32,411,048) –

295,415,183 696,414,145 230,467,682 96,665,812 – (32,411,048) 1,286,551,774

Timing of recognition of revenue from contracts with customers- At a point in time 16,802,624 699,616,709 200,708,330 11,384,273 – (17,513,533) 910,998,403- Over time – 1,439,438 – 80,639,538 – (7,134,183) 74,944,793

16,802,624 701,056,147 200,708,330 92,023,811 – (24,647,716) 985,943,196

Rental income 278,612,560 – 29,759,350 – – (7,763,332) 300,608,578

Operating results 235,690,320 125,297,461 7,236,662 8,151,288 (27,489,091) – 348,886,640

Profit/(loss) for the year before Share of profit in associate 235,690,320 125,297,461 6,870,953 8,151,288 71,580,987 – 447,591,009

Share of profit in associate 5,410,066 – 94,617,514 – (100,027,580) – –

Profit/(loss) for the year 241,100,386 125,297,461 101,488,467 8,151,288 (28,446,593) – 447,591,009

Depreciation 3,768,404 3,509,271 15,113,354 4,930,199 43,476 – 27,364,704

For the year ended 31 December 2017Revenues- External parties 316,917,932 625,845,973 576,333,547 85,139,989 – 1,604,237,441- Inter-segments(i) 4,022,765 7,588,347 5,882,829 10,136,016 – (27,629,957) –

320,940,697 633,434,320 582,216,376 95,276,005 – (27,629,957) 1,604,237,441

Operating results 262,660,354 116,164,335 77,176,607 7,124,849 (26,749,463) – 436,376,682

Profit/(loss) for the year before Share of profit in associate 262,660,354 116,164,335 49,044,901 7,043,069 88,151,710 – 523,064,369

Share of profit in associate 5,460,300 – 96,564,910 – (102,025,210) – –

Profit/(loss) for the year 268,120,654 116,164,335 145,609,811 7,043,069 (13,873,500) – 523,064,369

Depreciation 2,646,630 5,231,249 24,958,102 3,821,924 42,039 – 36,699,944

Note:(i) Inter-segment revenues are eliminated on consolidation.


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30. Segment information continued

30.2 Assets and liabilities:

PropertyTrading and distribution

Industrial manufacturing

Managedservices

ParentCompany Eliminations Total

At 31 December 2018Current assets 123,895,671 559,426,309 176,842,647 96,323,212 510,682,007 (235,677,867) 1,231,491,979 Non-current assets 7,275,348,899 11,228,814 191,041,116 12,826,619 324,217,270 – 7,814,662,718

Total assets 7,399,244,570 570,655,123 367,883,763 109,149,831 834,899,277 (235,677,867) 9,046,154,697

Current liabilities 222,895,480 160,460,877 113,705,602 25,694,909 164,984,054 (231,286,085) 456,454,837 Non-current liabilities 146,635,847 10,342,631 8,390,039 5,182,883 370,541,176 – 541,092,576

Total liabilities 369,531,327 170,803,508 122,095,641 30,877,792 535,525,230 (231,286,085) 997,547,413

Capital expenditure(ii) 276,509,496 1,313,505 8,853,224 2,880,075 20,874 – 289,577,174

At 31 December 2017Current assets 199,652,050 531,855,544 198,558,926 96,845,486 178,842,791 (103,984,411) 1,101,770,386 Non-current assets 7,002,608,505 20,969,575 198,019,528 10,765,319 336,178,691 (485,523) 7,568,056,095

Total assets 7,202,260,555 552,825,119 396,578,454 107,610,805 515,021,482 (104,469,934) 8,669,826,481

Current liabilities 79,724,424 151,558,551 119,854,140 26,514,506 326,164,308 (111,284,474)(i) 592,531,455Non-current liabilities 1,255,243 10,331,597 12,573,644 4,785,422 1,804,447 – 30,750,353

Total liabilities 80,979,667 161,890,148 132,427,784 31,299,928 327,968,755 (111,284,474) 623,281,808

Capital expenditure(ii) 84,743,902 3,320,699 15,131,107 3,167,639 109,296 – 106,472,643

Notes:(i) Inter-segment balances are eliminated on consolidation.(ii) Capital expenditures consist of additions to property, plant and equipment and investment properties.

31. Financial risk management

31.1 Financial risk factorsThe Group’s principal financial liabilities comprise interest bearing loans and borrowings, bank overdrafts, amounts due to related parties and trade accounts payable. The main purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has various financial assets such as trade accounts and other receivables, amounts due from related parties and bank balances which arise directly from its operations.

The main risks arising from the Group’s financial instruments are market risk, credit risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

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

(i) Interest rate riskThe Group’s financial assets and liabilities that are subject to interest rate risk comprise bank deposits, interest bearing loans and borrowings and bank overdrafts. At the reporting date, the interest rate profile of the Group’s interest bearing financial instruments was as follows:

2018 2017

Fixed interest rate instruments:Financial liabilities – –

Floating interest rate instruments:Financial assets 8,272,947 8,116,231Financial liabilities (600,553,469) (233,723,486)

(592,280,522) (225,607,255)

The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s financial assets and liabilities with floating interest rates.

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31. Financial risk management continued

31.1 Financial risk factors continuedThe following table demonstrates the sensitivity of the consolidated statement of profit or loss and other comprehensive income to reasonably possible changes in interest rates by 25 basis points, with all other variables held constant. The sensitivity of the consolidated statement of profit or loss and other comprehensive income is the effect of the assumed changes in interest rates for one year, based on the floating rate financial assets and financial liabilities held at 31 December. The effect of decreases in interest rates is expected to be equal and opposite to the effect of the increases shown.

Changes in basis points Effect on profit

2018Floating interest rate instruments +25 b.p. (9,056)

2017Floating interest rate instruments +25 b.p. (952,229)

(ii) Foreign currency riskForeign currency risk is the risk that the value of the financial instruments will fluctuate due to changes in foreign exchange rates.

Trade accounts payable and accrued expenses include amounts due in foreign currencies, mainly US Dollar, UAE Dirham, Great Britain Pound (GBP) and Euro, of which the Group has a currency risk primarily on the balances payable in Euro and GBP.

The Group does not hedge its foreign currency exposure. As both Qatari Riyal and UAE Dirham are pegged to the US Dollar, balances in US Dollars and UAE Dirhams are not considered to represent significant currency risk to the Group.

In the opinion of the management, the Group’s exposure to currency risk as at 31 December 2018 and 2017 is minimal as the foreign currency financial liabilities denominated in Euro and GBP represent 4% (2017: 4%) of total liabilities. Hence, not considered to represent significant risk. (B) Credit riskCredit 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 exposure to credit risk is indicated by the carrying amount of its financial assets, which consist principally of outstanding trade and retention receivables, amounts due from related parties, other receivables and cash and cash equivalents.

(i) Risk management The Group sells its products and provides services to various parties. It is the Group’s policy that all customers who wish to obtain on credit terms are subject to credit verification procedures to ensure credit worthiness. Each new customer is analysed individually for creditworthiness before the delivery of products or services. Customers that fail to meet the creditworthiness may transact with the Group only on prepayment basis.

Property rentals are mostly received in advance or contracted with post-dated cheques. In addition, receivable balances are monitored on an ongoing basis and the purchase limits are established for each credit customer, which are reviewed regularly based on the level of past transactions and settlement. The Group’s maximum exposure with regard to trade receivables, net of allowance reflected at the reporting date, was as follows:

Business segment: 2018 2017

Property 16,111,282 34,523,673Trading and distribution 205,131,911 235,147,184Industrial manufacturing 53,506,686 86,071,996Managed services 21,460,697 24,105,844

Net trade receivables 296,210,576 379,848,697

With respect to credit risk arising from the other financial assets of the Group, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments as follows:

2018 2017

Bank balances 605,861,437 349,723,280Amounts due from related parties 48,963,825 134,777,767Retention and other receivables 58,733,693 36,311,552

Other financial assets 713,558,955 520,812,599

Total credit risk exposure 1,009,769,531 900,661,296

The Group reduces the exposure of credit risk arising from other financial assets by maintaining bank accounts in reputed banks and providing services only to creditworthy related parties.


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31.1 Financial risk factors continued(ii) Impairment of financial assets Information about the Group’s financial assets subject to IFRS 9’s new expected credit loss model and the Group’s revised impairment methodology can be found in note 3(a).

Under the revised impairment methodology, the loss allowance as at 31 December 2018 is determined as follows for trade and retention receivables:

31 December 2018 Expected Loss rate Gross Carrying Amount Loss Allowance

Current 3.25% 252,504,590 8,195,163 More than 90 but less than 180 days past due 11.63% 29,771,865 3,463,498 More than 180 but less than 270 days past due 27.19% 13,244,368 3,600,813 More than 270 but less than 360 days past due 58.41% 10,956,017 6,399,938 More than 360 days past due 71.70% 92,898,504 66,606,687

Total 399,375,344 88,266,099

(iii) Significant estimates and judgments related to impairment of financial assetsThe loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Details of the expected loss rates used are disclosed in the table above.

(C) Liquidity riskLiquidity 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 risk 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 and is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans and borrowings.

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of financial assets (e.g. accounts receivable) and projected cash flows from operations. The Group’s terms of sales or services require amounts to be paid within 30-90 days from the invoiced date. The Group has facilities exposure from financial institutions which are also used to meet short term financing needs.

The table below summarises the maturity profile of the Group’s financial liabilities at 31 December based on contractual undiscounted payments.

0 to3 months

3 to 12 months 1 to 5 years > 5 years Total

2018Borrowings 22,109,176 93,671,709 578,288,760 – 694,069,645 Trade accounts payable 193,665,094 – – – 193,665,094 Other payables 74,086,945 – – – 74,086,945 Amounts due to related parties 16,874,935 – – – 16,874,935

306,736,150 93,671,709 578,288,760 – 978,696,619

2017Borrowings 222,663,550 6,420,031 5,645,323 – 234,728,904Trade accounts payable 155,271,274 – – – 155,271,274Other payables 111,389,435 – – – 111,389,435Amounts due to related parties 13,622,338 – – – 13,622,338

502,946,597 6,420,031 5,645,323 – 515,011,951

31.2 Capital managementThe Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the capital, which the Group defines as total shareholders’ equity, excluding non-controlling interests and the level of dividends to ordinary shareholders.

The Board also seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The Group’s target is to achieve a return on shareholders’ equity (excluding non-controlling interests) greater than the weighted average interest expense on interest bearing loans and borrowings.

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Financials



31.2 Capital managementThe Group manages its capital structure and makes adjustments to it, in light of changes in economic and business conditions and shareholders’ expectation. No changes were made in the objectives, policies or processes during the years ended 31 December 2018 and 2017.

The Group monitors the capital using a gearing ratio, which is debt divided by capital plus debt. The Group’s policy is to keep the gearing ratio below 40%. The Group includes within debt, interest bearing loans and borrowings, less cash and cash equivalents. Capital includes equity attributable to the equity holders of the parent.

2018 2017

Borrowings 600,553,469 233,723,486Less: Cash and cash equivalents (599,889,857) (346,827,554)

Net debt/(cash and cash equivalents) 663,612 (113,104,068)

Total capital 8,007,437,119 8,006,863,764

Capital and net debt 8,008,100,731 7,893,759,696

Gearing ratio 0.01% (1.43%)

The gearing ratio has decreased from last year due to a greater increase in cash and cash equivalents generated during the year than borrowings drawn (notes 13).

32. Fair values of financial instruments Financial instruments comprise financial assets and financial liabilities.

Financial assets consist of bank balances, short term bank deposits, amounts due from related parties, retention and other receivables and trade accounts receivable. Financial liabilities consist of bank overdrafts, borrowings, amounts due to related parties and trade accounts payable.

The fair values of these financial instruments except for borrowings approximate their carrying values due to the short term maturities of these instruments.

The fair value of borrowings is estimated based on discounted cash flows using interest rate currently available for the debt or similar terms and remaining maturities. As all borrowings carry variable interest rates, the fair value of borrowings approximates their carrying values.

33. Critical judgements and key sources of estimation uncertaintyIn the application of the Group’s accounting policies, which are described in note 2, management is required to make certain judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised.

33.1 Critical judgments in applying accounting policiesThere are no critical judgments, apart from those involving estimations that management has made in the process of applying the entity’s accounting policies.

33.2 Key sources of estimation uncertaintyThe following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

– Estimate the fair value of investment properties (Note 5) – Estimated useful lives of property, plant and equipment (Note 6) – Estimation of inventory net realisable value (Note 10) – Estimate the recoverability of receivables and other receivables (Note 31)

The estimates and underlying assumptions are reviewed regularly. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.


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