1. religion and spirituality
2. islam

Director’s Report
Dear Shareholders,
I am pleased to welcome you all on behalf of the Board of Directors to the Annual General
Meeting of Galfar Engineering & Contracting SAOG and to present to you the Annual
Report for the Year ended 31st December 2014.
Business environment is undergoing changes which have slowed down the decision
making process in general. This has adversely affected the Company. The Board is
deeply concerned with the declining financial performance of the Company and has taken
strategic steps to improve the situation by focusing specifically on the settlement of
Company’s outstanding dues and claims, and execution of projects in time and within
budget.
The Company has substantially completed the MC5 Runway works of Salalah Airport
Project and will be delivered for operational use soon.
The Company’s 100% subsidiaries have been performing well and our strategy of having
subsidiaries for specific activities has generated value addition and stakeholders’
satisfaction. The company is now planning to have more such subsidiaries to concentrate
on specific activities. One such activity envisaged is to concentrate on water projects.
Galfar has qualified along with our consortium/joint venture partner for Oman Rail project,
but our JV partner decided not to submit due to some technical matters.
Page 1 of 6
Economic Environment
Oman Government is keen to maintain the economic growth despite the recent decline in
international oil prices. This is reflected in its budget for 2015, wherein the provision for
expansion in Oil and Gas production has increased to over RO 2 Billion. Companies in
the private sector engaged in oil extraction have also announced their investment plans.
This augurs well for growth in the Oil and Gas sector. The budget also provides for
continuing infrastructure projects including tourism and road projects. Your company is
actively pursuing these opportunities.
Subsidiaries:
Galfar Aspire Projects & Services LLC and Galfar Aspire Readymix LLC, two of the wholly
owned subsidiaries of Galfar in Oman have achieved good financial results. In addition to
catering to the needs of Galfar, they have achieved 51% of their turnover from non-Galfar
revenues.
Galfar India, a wholly owned subsidiary of Galfar Oman, is executing two DBFOT road
projects of RO 76 Million through our 100% subsidiary SPV companies,
Salasar
Highways Private Limited and Kashipur-Sitarganj Highways Private Limited
Operations
Galfar maintains its position as one of the leading contracting companies in the Sultanate
of Oman.
We have been facing procedural constraints in the process of collecting our ageing
receivables. Therefore, the Company’s average collection period has increased from 210
to 259 days. This has led to increased bank borrowing and interest cost. The Company
has intensified its collection and follow up efforts at all levels, the results of which are
expected to be seen in 2015.
Page 2 of 6
Certain projects were scheduled to be completed in December 2014. However, due to
reasons beyond our control these works could not be completed, resulting in the
Company incurring additional costs which has impacted our bottom line.
The summary of the performance of the Company (including Subsidiaries) is as follows:
In RO Million
Particulars
Gross revenue
Profit from
Operation
Net Profit After Tax
2014
2013
372.510
412.408
12.660
21.036
0.197
7.584
Omanisation
Galfar is committed to the development of Omani Nationals, and currently employs 4491
Omani nationals. It is actively pursuing recruitment, training and retention of Omani
Nationals in the technical and managerial cadres.
The Training Centre at Al Hail is engaged in training and skill development of Omanis for
the construction industry and this adds to the In Country Value.
Corporate Structure and Governance
At the last Annual General Meeting of the Company in March 2014, the share holders
had duly elected a new board of nine members, including three new members, viz. Mr.
Abdul Qadir Askalan, Mr. Mohiuddin Mohamed Ali, and Mr. Raiz Basheeruddin. The
Board has formed two new committees viz. Supervisory and Follow up Committee
(SAFCOM) and Human Resource Committee (HRC) and re-constituted the Internal Audit
Committee.
Page 3 of 6
The Company has appointed a new CFO, Mr. Ram Mohan N. with effect from 31st August
2014.
The Company has implemented the Code of Conduct and Whistleblower Policy during
the year. This was recommended by the external consultant appointed by the Board of
Directors to review and strengthen the internal control system and corporate governance.
Companywide awareness program has been rolled out and uploaded in the company’s
website.
Galfar has in place various internal systems and manuals to assist the management in
day to day operations. These are reviewed and updated from time to time. A
comprehensive corporate governance report is included in the Annual report of 2014.
Health, Safety and Environment
Galfar is pleased to report that it has achieved a significant milestone of 40 million man
hours without Loss Time Injury in the Oil & Gas and EPC Unit. Galfar Management
Systems are certified for compliance with ISO 29001:2010, ISO 9001:2008, OHSAS
18001:2007 and ISO 14001:2004 Standards.
Page 4 of 6
Outlook
The outlook for the construction industry in Oman remains robust. The government
continues its plans to go ahead with various infrastructure and services projects.
Roads & Bridges
We have been awarded the following projects:
Barka – Nakhal Road
-
RO 65 Million
Dualization of Nizwa-IbriRoad
-
RO 28 Million
Batinah Tunnel
-
RO 22 Million
Further, the Taqa-Mirbat contract, awarded for RO 40 Million, has received the project
commencement order.
This provides a stable base for the Roads & Bridges Unit.
Oil & Gas
Prospects for Oil & Gas sector is bright in view of the increase in government’s planned
expenditure.

Our Off-Plot Delivery Contract (ODC) with PDO will expire in August 2015 and an
offer for extension till March 2016 has been received.

There are other clients in the private sector with whom the company is engaged in
providing services.

We have also been awarded the contract for 132KV OH line for British Petroleum
(BP) for USD 10 Million, in February 2015.
Page 5 of 6
At the beginning of the year, the Company had an order book backlog of RO 675 Million.
In addition, we expect to bag projects during the year which will further strengthen our
order book position.
On Record
We pray for His Majesty’s health, long life and early return to his beloved Sultanate.
As an Omani Public Company, we are thankful to His Majesty’s Government for their
continued support.
We thank the Banks & Financial Institutions, Capital Market Authority, esteemed clients,
suppliers, sub-contractors and shareholders for their cooperation and continued support.
We also thank the employees and management of the company for their commitment and
dedication.
Salim Said Hamad Al Fannah Al Araimi
Chairman
Page 6 of 6
Corporate Governance Report
Company’s Philosophy
Galfar Engineering and Contracting SOAG is committed to good corporate governance and
healthy corporate practices. The concept of good governance at Galfar envisages care of the
Company to enhance the value of all its stakeholders by adhering to proper methods of
management, internal controls, accountability, corporate governance rules and high level of
transparency to the extent of not affecting the competitive position of the Company. The
Company continues applying well-defined Management Systems Procedures (MSPs) in
accordance with ISO 9001.
The Company has implemented the Code of Conduct and Whistleblower Policy during the
year. This was recommended by the external consultant appointed by the Board of Directors
to review and strengthen the internal control system and corporate governance. Companywide
awareness program has been rolled out and uploaded in the company’s website.
The company is fully abiding by the corporate governance code issued by the Capital Market
Authority (CMA). The company has taken all necessary steps to fulfill the objective of good
corporate governance.
The Board Members are experienced in their diversified professional fields. They have given
great support to the Board to exercise its widest authorities in managing the Company and
supervise the good performance of the Company’s business. The Board is responsible for
achieving the company’s objectives. For this purpose, the Board is assisted by various sub
committees and the higher executive management of the company. The Board has formed
two new sub committees, Supervisory and Follow up Committee and the Human
Resource Committee, and has reconstituted the Audit Committee. In addition, there is a wellstructured organization for management executives whose authorities are defined in a revised
Manual of Authority.
In general the board exercises its primary functions and duties in line with the powers
stipulated in article 35 of the Articles of Association of the company.
Board of Directors
At the Annual General Meeting of the Company held on 26th March 2014, the Shareholders
duly elected a new Board of 9 members, which includes nine non-executives. Four of the
Directors are independent.
The Members of the Board have professional and practical experience in their respective fields
ensuring proper direction and control of company’s activities. No director is a member of more
than 4 joint stock public companies whose shares are listed on the Muscat Securities Market
(MSM) and no director is chairman of more than 2 public companies whose principal office is
in the Sultanate of Oman. None of the directors are members of a Board of a joint stock public
or closed company which carries out similar business and whose principal office is in the
Sultanate of Oman.
1
Sr.
No.
Name of Director &
Representative
1
Sheikh Dr.Salim Said Hamed Al
Fannah Al Araimi
2
Sheikh Salim Abdullah Saeed Badr
Al Rawas
3
Dr.Hatem Bakheit Saeed Al
Shanfari
Designation
Category
Chairman
Non Independent
Non – Executive
Vice Chairman
Non Independent
Non – Executive
Directorship in Other Joint Stock
Companies
Oman Medical College S.A.O.C
Oman Oil Marketing Company
S.A.O.G , Kunooz Oman Holding
S.A.O.C.
Director
Independent
Non - Executive
Gulf Investment Services Co.
S.A.O.G, Gulf Baader Capital
Markets Co. S.A.O.C
Independent
Non - Executive
Voltamp Energy Co. S.A.O.G., Al
Madina Insurance Co S.A.O.C.,
and National Bank of Oman
S.A.O.G.
4
Mr. Hamad Mohamed Al Wahaibi
Director
5
Engr. Salman Rashid Al Fannah Al
Araimi
Director
Non Independent
Non – Executive
6
Ms. Khalood Mohamed Rashid Al
Fannah Al Araimi
Director
Non Independent
Non – Executive
7
Abdulqader Askalan
(W.E.F 26.03.2014)
Director
Independent
Non – Executive
8
Engr. Mohiuddin Mohamad Ali
(W.E.F 26.03.2014)
Director
Non Independent
Non - Executive
NIL
9
Engr. Raiz Basheeruddin
(W.E.F 26.03.2014)
Director
Independent
Non - Executive
NIL
2
NIL
Gulf Plastic Industries Co.
S.A.O.G
and Oman Medical
College S.A.O.C
Oman Telecommunication
Company S.A.O.G
Board Meetings:
During the year 2014, the Board held 9 meetings. Five meetings of them were held after election of
the new Board. The following table shows details of the same.
Board of Directors Meetings & Attendance Details - Year 2014
√
Sr.
No.
1
2
Name of
Director &
Representative
Sheikh Dr.Salim
Said Hamed Al
Fannah Al
Araimi
Dr.P. Mohamed
Ali
Meeting
40
Meeting
41
Meeting
42
Meeting
43
Meeting
44
26-Mar14
First
meeting
of
Elected
Board
Meeting
45
Meeting
46
Meeting
47
Meeting
48
14-Jan14
03-Feb14
11-Feb14
06-Mar14 &
20-Mar14
13-May14
10-Aug14
09-Nov14
30-Dec14
√
√
√
√
√
√
X
X
X
√
X
X
X
X
X
X
X
X
X
√
√
X
X
X
X
X
X
√
X
X
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
X
√
√
X
X
X
X
X
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
X
X
X
X
X
√
√
√
√
10
Dr.Adil Abdul
Aziz Yahya Al
Kindy
Dr.Hatem
Bakheit Saeed
Al Shanfari
Sheikh Salim
Abdullah Saeed
Badr Al Rawas
Sheikh Yahya
Abdullah Al
Fannah Al
Araimi
Engr. Salman
Rashid Al
Fannah Al
Araimi
Mr. Hamad
Mohamed Al
Wahaibi
Ms. Khalood
Mohamed
Rashid Al
Fannah Al
Araimi
Mr. Abdulqader
Ahmed Askalan
11
Engr. Mohiuddin
Mohamad Ali
X
X
X
X
√
√
√
√
√
12
Engr. Raiz
Basheeruddin
X
X
X
X
√
X
√
√
√
3
4
5
6
7
8
9
3
Remuneration to the Board of Directors:
The total amount proposed to be paid to the Directors for the year 2014 is RO 73,500/-, being the
sitting fees for the year 2014, which will be paid after approval in AGM dated 25th March, 2015.
The total amount paid to the Directors or provided during the year 2014 for the year 2013 is as
under:
Sr.
Name of Director & Representative
Sitting Fees
Remuneration
Total
No.
1
Sheikh Dr.Salim Said Hamed Al Fannah Al Araimi
2
Dr.P. Mohamed Ali
3
Dr.Adil Abdul Aziz Yahya Al Kindy
4
Dr.Hatem Bakheit Saeed Al Shanfari
5
Sheikh Salim Abdullah Saeed Badr Al Rawas
6
Sheikh Yahya Abdullah Al Fannah Al Araimi
7
Engr. Salman Rashid Al Fannah Al Araimi
8
Mr. Hamad Mohamed Al Wahaibi
9
Ms. Khulood Mohamed Rashid Al Fannah Al Araimi
Total
4,900
15,422
20,322
7,700
15,422
23,122
5,900
15,422
21,322
6,700
15,422
22,122
7,700
15,422
23,122
4,400
15,422
19,822
7,700
15,422
23,122
8,100
15,422
23,522
8,100
15,422
23,522
61,200
138,800
200,000
Board Secretary
The elected Board has re-appointed Mr.Abdelbagi Daffalla, a legal professional, as secretary of the
Board. The secretary facilitates holding and smooth conduct of the Board Meetings, records the
minutes of the meetings, drafting of resolutions, following-up implementation of the Board resolutions
and to inform the competent bodies therewith. The secretary also serves as a liaison between the
board and its Sub-Committees and addresses the subsidiaries and associate companies on any
matters or in respect of the resolutions being issued by the or to be issued for them by the parent
Company.
4
Other Committees:
Supervisory and Follow up Committee:
The Board assigned four members as a task committee and after holding two preliminary
meetings, the Board decided to form it under the name Supervisory and Follow up Committee
(SAFCOM) consisting of 4 members and thereafter expanded to 5 members. SAFCOM assists
the board in following up and improvement of outstanding receivables. It also studies Investment
opportunities for the company and monitors performance of all Company units. SAFCOM helps
the management of the company to play its role effectively and efficiently to achieve the
Company’s objectives and ensures the interests of the Shareholders are protected. The
committee held 5 meetings during the year 2014.
Name of members of the committee
Designation
Sheikh Dr.Salim Said Hamed Al Fannah Al Araimi
Chairperson
Sheikh Salim Abdullah Saeed Badr Al Rawas
Member
Dr.Hatem Bakheit Saeed Al Shanfari
Member
Mr. Abdul Qader Askalan
Member
Engr. Mohiuddin Mohamad Ali
Member
SAFCOM Attendance details – 2014
Sr.
No.
Name of Director &
Representative
1st
Meeting
2nd Meeting
3rd
Meeting
4th
Meeting
5th
Meeting
19-May-14
01-June-14
28-Sep-14
02-Nov14
14-Dec14
1
Sheikh Dr.Salim Said
Hamed Al Fannah Al
Araimi
√
√
X
X
X
2
Sheikh Salim Abdullah
Saeed Badr Al Rawas
√
√
√
√
√
3
Dr.Hatem Bakheit
Saeed Al Shanfari
X
√
√
√
√
4
Mr. Abdul Qader
Askalan
√
√
√
√
√
5
Engr. Mohiuddin
Mohamad Ali
X
X
X
X
√
5
Human Resource Committee:
The Board has formed the Human Resources Committee, which consists of 4 members, to assist
the Board in fulfilling its oversight responsibilities on HR matters and to reorganize and restructure
the Human Resources Unit in order to enhance organizational effectiveness. The committee also
reviews from time to time the systems, regulations and policies of the HR Unit of the company.
The committee held 4 meetings during the year 2014
Name of members of the committee
Designation
Ms. Khulood Mohamed Rashid Al Fannah Al Araimi
Chairperson
Engr. Salman Rashid Al Fannah Al Araimi
Member
Mr. Hamad Mohamed Al Wahaibi
Member
Engr. Mohiuddin Mohamad Ali
Member
Human Resource Committee Attendance details – 2014
Sr.
No.
Name of Director & Representative
1st
Meeting
2nd Meeting
3rd
Meeting
4th
Meeting
06-May-14
11-Aug-14
10-Sep-14
03-Nov-14
1
Ms. Khulood Mohamed Rashid Al Fannah Al
Araimi
√
√
√
√
2
Engr. Salman Rashid Al Fannah Al Araimi
√
√
√
√
3
Mr. Hamad Mohamed Al Wahaibi
√
√
√
√
√
√
√
√
4
Engr. Mohiuddin Mohamad Ali
6
Audit Committee
The Board reconstituted the Audit committee which consists of 5 members. The Audit
Committee assists the board in discharging its oversight responsibilities and oversees the
financial reporting process to ensure the balance, transparency and integrity of published
financial information. The audit committee also reviews the effectiveness of the company’s
internal financial controls and risk management system; the effectiveness of the internal audit
function; the independent audit process including recommending the appointment and
assessing the performance of the external auditor; the company’s process for monitoring
compliance with laws and regulations affecting financial reporting and code of business
conduct.
In performing its duties, the committee maintains effective working relationships with the board
of directors, management, and the external and internal auditors. To perform its role
effectively, each committee member will need to develop and maintain his skills and
knowledge, including an understanding of the committee’s responsibilities and of the
company’s business, operations and risks. The Committee held nine meetings during the year
2014.
Sr. No.
Name of the members of the committee
Designation
1
Dr.Hatem Bakheit Saeed Al Shanfari
2
Mr. Hamad Mohamed Al Wahaibi
Member
3
Ms. Khalood Mohamed Rashid Al Fannah Al Araimi
Member
Engr. Salman Rashid Al Fannah Al Araimi
Member
Engr. Raiz Basheeruddin
Member
4
5
Chairman
7
Audit Committee Meetings & Attendance Details - Year 2014
√
Sr.
N
o.
1
2
3
4
5
6
Name of
the
members
of the
committe
e
Dr.Hatem
Bakheit
Saeed Al
Shanfari
Sheikh
Yahya
Abdullah
Al Fannah
Al Araimi
Mr.
Hamad
Mohamed
Al Wahaibi
Ms.
Khalood
Mohamed
Rashid Al
Fannah Al
Araimi
Engr.
Salman
Rashid Al
Fannah Al
Araimi
Engr. Raiz
Basheerud
din
1st
Meeti
ng
2nd
Meeti
ng
3rd
Meeti
ng
4th
Meeti
ng
5th
Meeti
ng
6th
Meeti
ng
7th
Meeti
ng
8th
Meeti
ng
9th
Meeti
ng
22Jan14
10Feb14
04Mar14
22Apr14
11May14
19Jun14
10Aug14
09Nov14
07Dec14
Chairman
√
X
√
√
√
√
√
√
√
Member
X
√
√
X
X
X
X
X
X
Member
√
√
√
√
√
√
√
√
X
Member
√
√
√
√
√
X
√
√
√
Member
X
X
X
√
√
√
√
√
√
Member
X
X
X
√
√
√
√
√
√
Designati
on
Procedure for Standing as a Candidate for the Board:
The right to stand as a candidate for membership of the Board of Directors of the Company is
open to shareholders and non shareholders.
In case of a shareholder, whether in personal capacity or representing a juristic person, he
must have a minimum equity of not less than 10000 shares.
Key Management Remuneration:
Total remuneration during the financial year 2014 to top Management (top 5) was RO
534,838/8
Compliance with Rules and Regulations:
The Company has been following the applicable rules and regulations issued by MSM, CMA
and those stipulated in the Commercial Companies Law 1974 as amended.
During the year 2014, a fine of RO 1450/-, was imposed on the Company, for delay in
disclosure of the Unaudited Financial Statement for the second quarter on the Company’s
page at the website of Muscat Securities Market.
Communication with Shareholders and Investors:
The company maintains good communication relations with the shareholders and Investors
and responds as much as possible to their queries and requests in line with the disclosures
rules. The company, during the period, conducted several phone interviews with financial
analysts and investors.
The company publishes its un-audited financial results in the newspapers on a quarterly basis
and the audited financial statements annually. Detailed financial statements are sent to
shareholders on request. The company publishes its quarterly and annual results in MSM
website. Detailed financial statements are sent to shareholders on request. The company
posts its quarterly and annual results on MSM website, and also on the Company’s website:
www.galfar.com. All the Company’s announcements are posted on MSM’s website.
The Management discussions and analysis report forms an integral part of the Annual Report.
Statement on Market Price and distribution of Holdings:
High / Low price during each month
Market High/Low price during each month of 2014
Sr. No.
Month
High
Low
Closing
1
January-14
0.316
0.268
0.282
2
February-14
0.297
0.262
0.267
3
March-14
0.267
0.241
0.249
4
April-14
0.270
0.240
0.246
5
May-14
0.253
0.218
0.221
6
June-14
0.272
0.222
0.252
7
July-14
0.272
0.252
0.264
8
August-14
0.270
0.237
0.240
9
September-14
0.245
0.225
0.227
10
October-14
0.228
0.161
0.166
11
November-14
0.179
0.153
0.155
12
December-14
0.176
0.100
0.161
9
Distribution of ownership of shares between shareholders
(Including Shares having preferential voting rights)
Sr. No.
Category
1
Less than
5%
2
5% to 10%
3
Above 10%
Total
No. of
Shareholders
No. of
Shares
% of
Shareholding
4,591
127,784,585
33.85
2
46,765,847
12.39
4
202,918,329
53.76
4,597
377,468,761
100.00
There are no Securities / Convertible Financial Instruments as on the Balance Sheet date which
will have an impact on the Shareholders’ equity.
Profile of the Statutory Auditors
PwC is a global network of firms operating in 157 countries with more than 195,000 people who
are committed to delivering quality in assurance, tax and advisory services. PwC also provides
corporate training and professional financial qualifications through PwC's Academy.
Established in the Middle East for over 40 years, PwC Middle East has firms in Bahrain, Egypt,
Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, the Palestinian territories, Qatar, Saudi Arabia and
the United Arab Emirates, with around 3,000 people. (www.pwc.com/middle-east)
PwC has been established in Oman for over 40 years and the Firm comprises 3 partners, including
one Omani national, and over 135 professionals and support staff. Expert assurance, tax and
advisory professionals are able to combine internationally acquired specialist consulting and
technical skills with relevant local experience.
PwC refers to the PwC network and/or one or more of its member firms, each of which is a
separate legal entity. Please see www.pwc.com/structure for further details.
Audit fees of the Company and Subsidiaries:
In addition to the below stated fees, the Company has paid RO. 885/- towards participation fee
for the Company’s delegates to attend a seminar on International Financial Reporting Standards,
organized by PricewaterhouseCoopers LLP. The Company has also paid RO. 15,950/- during
the year as fee towards their professional services rendered for issuing various tenders related
certificates in their capacity as the statutory auditors of the Company.
10
Audit Fees of Company and Subsidiaries and fees for other services paid to
the Auditors for 2014
Sr. No.
Amount (In
RO)
Particulars
1
Statutory Audit Fees (Parent)
35,000
2
Statutory Audit Fees Al Khalij Heavy Equipment &
Engineering LLC (Subsidiary)
2,750
3
Statutory Audit Fees Galfar Training Institute LLC
(Subsidiary)
1,700
4
Statutory Audit Fees Galfar Engineering & Contracting India
Pvt. Ltd (Subsidiary)
5,938
5
Statutory Audit Fees Aspire Projects & Services LLC
(Subsidiary)
2,300
6
Statutory Audit Fees Galfar Aspire Readymix LLC
(Subsidiary)
2,200
7
Statutory Audit Fees Salasar Highways Pvt. Ltd. (Subsidiary)
920
8
Statutory Audit Fees Kashipur Sitarganj Highways Pvt. Ltd.
(Subsidiary)
920
The Board of Directors acknowledges as at December 31, 2014:
The Board of Directors acknowledges:



With its liability for the preparation of financial statements in accordance with the
applicable standards and rules.
Review of the efficiency and adequacy of internal control systems of the Company and
that it complies with internal rules and regulations. In order to enhance and strengthen
the efficiency of the internal control systems, the Company has appointed a chief
internal auditor and also recruited technical auditors in the Internal Audit Department.
That there is no material matter that affects the continuation of the Company and its
ability to continue its production and operations during the next financial year.
Salim Said Hamed Al Fannah Al Araimi
Chairman
11
ManagementDiscussionandAnalysisReport2014
GCC Economic Scenario
The age of oil-driven abundance seems to be changing in the Gulf region. Apparently the
decline in oil price is directing Governments’ focus towards deeper economic
diversification and strategy to boost economic growth. The objective is to create a
multiplier effect by exploiting the socio-economic potential of the massive investments
planned in the Gulf region. For example, it has been announced that over $ 200bn is
expected to be invested in over 40000 Km of rail across the GCC. The vision is to create
the infrastructure and enabling environment to accelerate economic growth and attract
companies, manufacturers, human resources and capital into the GCC economies. Oman
is expected be a significant beneficiary in this scenario.
Oman Economy
Oman Budget 2015 is aimed towards driving and sustaining growth. It is expected that
real growth for 2014 will be around 4.4% and will increase to 5% in 2015. This includes a
budgeted 5.5% growth in non-oil activities. Despite the deep reduction in global oil prices,
Oman’s 2015 budget comes with the commitment that critical projects will remain on track
and that projects aimed towards economic diversification and stimulated economic growth
will continue to be supported.
Announcement of continuing investment in Duqm, the Sohar – Al Buraimi section of the
railway project and several major road projects is noteworthy. Budget also speaks of
several significant tourism projects, including a number of hotel developments and the
Oman Convention and Exhibition Centre, in Muscat.
In general, business environment for construction companies appears positive and
supportive.
Galfar Overview
Galfar Engineering and Contracting SAOG is carrying out works of around USD 1 Billion
per year. We stay committed to the Omanization agenda through planned employment
opportunities and employee development through quality training. Also we remain
focused on our goal to support the growth of Small and Medium Enterprises (SME).
Page 1 of 6
Our resource mobilization capabilities continue to be our major strength. The equipment
spread available within Galfar remains unparalleled in the local market. Each year the
fleet is brought up-to-date for executing the actual workload.
Main Objectives and Operational Results
Galfar’s objectives are always aligned with the policies of the Sultanate. Our aim is to
delight our stakeholders through our committed efforts to deliver our projects in time in
strict compliance with safety and quality standards.
Company, through its efforts to support SMEs, has been able to network with a large
number of SMEs in the construction sector in Oman and add In Country Value.
Galfar is committed to achieve excellence in Quality, Health, Safety and environmental
protection.
The Company, including its subsidiaries has recorded turnover for the year 2014 RO 372
m (2013: RO 412 m) with profit after tax RO 0.2 m (2013: RO 7.6 m). The parent
company’s turnover for the year 2014 is RO 354 m (2013: RO 394 m) and the profit after
tax is RO 1.2 m (2013: RO 6.9 m).
Galfar has five subsidiaries and three associates in operations. The performance of the
subsidiaries as follows. Galfar Engineering & Contracting India Pvt. Ltd., which is
engaged in construction activities in India, recorded a turnover of RO 16 m (2013: 13 m)
with profit after tax RO 0.1 m (2013: RO 1.9 m). Galfar Aspire Readymix LLC, which
produces ready mix concrete, recorded a turnover of RO 17 m (2013: RO 15 m) with profit
after tax RO 1.1 m (2013: RO 1.1 m). Aspire Projects and Services LLC which is a
specialized engineering and services company had a turnover of RO 3.0 m (2013: RO
2.1 m) with profit after tax RO 0.3 m (2013: RO 0.2 m). Al Khalij Heavy Equipment &
Engineering LLC which specializes in hiring out of equipment recorded a turnover of RO
1.8 m (2013: RO 1.9 m) with profit after tax RO 0.1 m (2013: RO 0.1 m). Galfar Training
Institute LLC which specializes in the field of training Omanis in various trades recorded
a turnover of RO 0.9 m (2013: RO 1.1 m) and incurred loss RO 0.1 m (2013: 0 m).
Human Resources
We aim to accomplish employee development through transparent and harmonious HR
policies, and maintain a motivating work environment and retain talent. Our goal is to be
seen as the most preferred employer in the construction sector. Among the construction
companies in the private sector in the Sultanate, Galfar has the largest number Omani
personnel.
Page 2 of 6
Omanization and Training
For over 41 years Galfar has been a committed partner in the progress of the Sultanate
of Oman in the Oil and Gas, Roads and Bridges, Civil and Marine Infrastructure and
Utilities and Services sectors of the construction industry. Our Omanization policies are
directed towards development, performance and steady growth within the organization.
Quality, Health, Safety and Environment:
Our company continues to maintain the competitive edge in Quality & HSE Management
in the contracting industry in Oman through our management systems certified for
compliance with ISO 29001:2010 (Petroleum & Petrochemical Sector specific standard),
ISO 9001:2008 (Quality), OHSAS 18001:2007 (Health & Safety) and ISO 14001:2004
(Environment) standards.
In addition to our ASME - ‘U’ & ‘R’ certifications, we have also been placed as an approved
subcontractor in AVME list of PDO for fabrication of Pig Launchers & Receivers.
We have worked 87 million man hours and have driven 106 million kilometers collectively
during the year, in our projects throughout the country.
Despite exposure to this enormous amount of activities & challenges, our performance
continues to be encouraging; our Lost Time Injury Frequency recorded during the year is
0.23 (lowest ever recorded and lower than the set limit of 0.4). Road Traffic Accident
Frequency of the company is also lower than the limit set for the year (2.41 against 3.0)
and lowest ever achieved.
We have also recorded several achievements in terms of man hours worked without Lost
Time Injury in our projects / units. The significant ones are 40 million man hours of Oil &
Gas and EPC Unit and 22 million man hours of Off-plot Delivery Contract.
We have conducted companywide campaigns during the year 2014, focusing on
promoting HSE compliance and Empowerment to stop unsafe work in addition to Toolbox
Talks improvement, Behavioral Safety awareness sessions and various Quality & HSE
trainings in-house.
Management commitment to HSE protection, camp hygiene & employee welfare,
subcontractor management and vehicle / equipment related incidents are
the
improvement areas currently under particular focus for which actions are addressed in
Corporate HSE Plan for the year 2015.
Page 3 of 6
Risks
Risks remain an integral part of the construction business in the region. One of the major
risks is the delay in receipt of our outstanding payments. This has led to a significant
increase in our borrowings and interest costs. We are working hard and closely with
government departments at all levels to collect our payments against the client-certified
invoices for the completed jobs.
Additionally we face risk of delay in completion of our jobs due to various external reasons
like delay in government approvals, changes of scope and approval for variation orders.
These factors are outside our control and they have negative impact in many cases and
they are potential threats to our profitability.
Higher salaries in other countries in the Arabian Peninsula are driving away our expatriate
workforce. This trend is also a threat to our operations.
Salaries and wages form a significant part of our costs. Government regulations require
year on year increase in salaries and wages. We strive to maintain a minimum, but highly
productive, workforce and price our tenders accordingly.
Internal Control Systems
In 2014 we have made a notable progress in putting adequate internal control systems
and monitoring processes in place to ensure that our business is conducted in a
transparent manner. The new Manual of Authority has been rolled out and it will be
updated whenever required.
The Management assures that it is fully aware of its responsibility towards all the
stakeholders of Galfar.
Corporate Social initiatives and Campaigns
Galfar has always been conscious of its responsibilities towards the society. We have
over the year carried out CSR activities on several fronts. One of the main focus as always
has been “Road Safety”. We have supported several campaigns which include small
organizations involved in spreading social awareness in locations as far of as Salalah.
Also we have contributed to safety campaigns integrating efforts together with the Royal
Oman Police.
Another main area of focus has been the contributions made towards organizations
encouraging small and medium enterprises. SME enhancement has received direct
impetus from His Majesty Sultan Qaboos himself and organization like ours together with
Page 4 of 6
the Chamber of Commerce are leaving no stone unturned to nurture and hand hold them
to succeed and grow.
We have also contributed towards several efforts being made by the Ministry of Health in
fighting infection, nursing conferences, and many others. Our efforts in continuously
supporting the Oman Forum which is the most focused programs in “Career Growth of
Omani Youth” has helped us in understanding the changing environments in our dynamic
and growing Sultanate. We will continue these and other efforts through 2015 while
remaining modest in our assertion of our contributions in such CSRs.
Outlook
Outlook for the construction industry in Oman appears good. Budget 2015 indicates that
Government is going ahead with the works that have been planned. We expect that the
oil price will recover to some extent in the second half of the year and from that
perspective, activities in the Oil & Gas Sector may continue at a high level.
Several road projects are seen to be in the pipeline and we stand a good chance to win
some of them during the year 2015. Market for civil works presents a significant
opportunity for works and we expect to have a good share in this area also. Civil work is
expected to grow phenomenally with Hotels, Hospitals and Heritage Centers being
planned for construction in the coming years. Water and wastewater is another sector
where, because of our expertise, we have a cutting edge over our competitors as we have
been executing many such treatment and conveyance projects all over Oman.
Galfar’s Order Book position is healthy and stands at RO 675 million at the beginning of
the year 2015.
Galfar is also a reputed facilities management provider in the Sultanate, commanding a
high level of client retention and steady growth in the last two decades. We offer a full
range of facilities and asset management services with innovative solutions tailored to
cater to clients in different sectors. Galfar provides operation and maintenance services
to a majority of sewage treatment and desalination plants in Oman. Most of these plants
are the ones constructed by Galfar.
Performance of our subsidiaries is good and there is ample scope to increase their
competitiveness and standing in the market.
Aspire Projects and Services LLC, is engaged in providing specialized Facilities
Management services for establishments. It will focus on energy saving, water cycle
management, alternative power and several such green energy initiatives.
Page 5 of 6
Galfar Aspire Readymix LLC has expanded its operations to Sohar & Duqm in 2014. It
has also set up a permanent establishment at Rusayal for Muscat operations. It is
planning to be self-reliant in some raw materials by commencing Grinding Units for GGBS
and having own aggregate source. It also aims to be the local producer of GGBS thereby
getting qualified for its product in the specifications of all major clients / consultants in
Oman. The company is also plan to commence an additional Plant for a Block Unit in
Muscat.
The Indian operations of Galfar have created significant value and they continue to remain
a key growth area as the demand for infrastructure projects is continually growing. Galfar
is trying to establish its footprint in India in all the major sectors and particularly in Oil &
Gas and other infrastructure projects.
We salute His Majesty Sultan Qaboos, who in the 44 years of his commendable rule has
transformed Oman into a powerful modern economy in the region. We shall endeavour
to reach even higher standards of project delivery through continuous improvement in our
processes and we wish to lead by action in Omanization as a true Omani enterprise.
Galfar’s broad image as a premier Omani company with its international presence is
without any comparison. We have the capability to deliver projects in all the sections of
engineering and construction industry with high quality standards in a safe and timely
manner to the entire satisfaction of all its stake holders.
Hans Erlings
Chief Executive Officer
Page 6 of 6
Galfar Engineering & Contracting SAOG & Subsidiaries
Consolidated Statement of Financial Position
As at 31st December, 2014
Notes
ASSETS
Non-current Assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Investment in associates
Investment available-for-sale
Retentions receivables
Amount in RO '000s
Consolidated
31 December
31 December
2014
2013
91,891
1,131
4,496
8,706
125
30,816
137,165
110,404
1,514
1,940
8,706
125
32,246
154,935
104,685
19,225
4,861
145
30,896
159,812
120,347
1,533
6,444
145
32,246
160,715
7
8
9
10
11
12
21,131
67,557
213,162
22,094
1,293
735
325,972
463,137
35,569
53,582
201,469
19,848
11,551
4,169
326,188
481,123
22,379
68,743
225,927
21,532
1,324
2,568
342,473
502,285
36,488
54,737
205,328
20,807
11,591
6,092
335,043
495,758
13
14
15
16
Non controlling interest
Total Equity
Non-current Liabilities
Term loans
Employees' end of service benefits
Contract advances from customers
Deferred tax liability
37,747
23,370
12,582
29,514
103,213
103,213
37,747
23,370
12,582
32,080
105,779
105,779
37,747
23,370
12,835
(1,859)
29,421
101,514
980
102,494
37,747
23,370
12,888
(1,788)
32,978
105,195
986
106,181
18
22
23
24
68,202
11,066
16,146
6,039
101,453
46,150
10,919
9,450
6,899
73,418
73,588
11,253
17,744
6,638
109,223
46,714
11,067
9,450
7,305
74,536
Current Liabilities
Term loans - current portion
Short term loans
Bank borrowings
Trade payables
Other payables and provisions
Provision for taxation
18
19
20
21
23
24
32,380
28,000
62,691
77,507
56,720
1,173
258,471
359,924
463,137
30,625
35,400
87,713
91,678
55,333
1,177
301,926
375,344
481,123
32,982
33,027
63,503
87,044
70,159
3,853
290,568
399,791
502,285
31,116
35,400
90,248
96,171
59,319
2,787
315,041
389,577
495,758
32
0.273
0.280
0.269
0.279
Current Assets
Inventories
Due from customers on contracts
Contract and trade receivables
Advances, prepayments and other receivables
Deposits with bank
Cash and bank balances
Total Assets
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Statutory reserve
Foreign currency translation reserve
Retained earnings
3
4
5
6
Parent Company
31 December
31 December
2014
2013
9
Total Liabilities
Total Equity and Liabilities
Net Assets per share (RO)
The consolidated financial statements were approved by board of directors on 7 March, 2015 and were signed on their behalf by:
____________________
Chairman
The attached notes 1 to 39 form part of these consolidated financial statements.
____________________
Chief Finance Officer
Galfar Engineering & Contracting SAOG & Subsidiaries
Consolidated Statement of Comprehensive Income
For the year ended 31st December, 2014
Amount in RO '000s
Parent Company
Notes
Contract income
Sales and services income
25
Total revenue
Consolidated
2014
2013
2014
2013
350,977
392,178
357,282
403,723
2,982
2,097
15,228
8,685
353,959
394,275
372,510
412,408
Other income
26
3,012
1,634
3,039
1,844
Contract and other direct costs
27
(335,465)
(367,517)
(350,070)
(380,257)
21,506
28,392
25,479
33,995
(10,357)
(11,404)
(12,819)
(12,959)
11,149
16,988
12,660
21,036
Gross profit
General and administrative expenses
28
Profit from operations
Financing costs, (net)
30
(9,755)
(9,078)
(10,371)
(9,578)
Share of loss of associates
6
-
-
(1,366)
(1,618)
1,394
7,910
923
9,840
(185)
(1,019)
(726)
(2,256)
1,209
6,891
197
7,584
-
-
(71)
(769)
1,209
6,891
126
6,815
1,209
6,891
169
7,533
-
-
28
51
1,209
6,891
197
7,584
0.003
0.018
Profit before tax
Income tax expense
24
Profit for the year
Other comprehensive income:
Item that may be subsequently reclassified to
profit or loss:
Foreign currency translation difference
Total comprehensive income for the year
Profit attributable to:
Equity shareholders of parent company
Non-controlling interests
Basic and diluted earnings per share
attributable to the equity shareholders of the
parent company (RO)
31
The attached notes 1 to 39 form part of these consolidated financial statements.
-
0.020
Galfar Engineering & Contracting SAOG & Subsidiaries
Consolidated Statement of Cash Flows
For the year ended 31st December, 2014
Amount in RO '000s
Parent Company
2014
2013
Consolidated
2014
2013
Operating Activities
Profit before taxation
1,394
7,910
923
9,840
21,794
22,449
23,571
23,880
400
405
409
406
9,755
9,078
10,371
9,578
-
-
1,366
1,618
2,084
2,619
2,213
2,724
(1,549)
(437)
(1,555)
(453)
(1,937)
(358)
(2,027)
(445)
Inventories
14,438
(2,976)
14,109
(3,660)
Trade and other receivables
(27,914)
(19,005)
(35,330)
(22,219)
Trade and other payables
Adjustments for:
Depreciation on property, plant and equipment
Amortisation of intangible assets
Finance cost
Share of loss of associates
Employees' end of service benefits
Gain on disposal of plant and equipment
Operating results before payment of end of service
benefits and working capital changes
Payment of end of service benefits
Working capital movements:
(12,784)
3,846
1,713
4,565
Retention receivables
1,430
(9,997)
1,350
(9,997)
Advance payables
6,696
(23,378)
8,294
(23,377)
Income tax paid
(1,049)
(1,545)
(331)
(1,469)
Net cash generated from/(used in) operating activities
12,758
(11,389)
25,076
(9,009)
Investing Activities
Purchases of property, plant and equipment
(5,025)
(28,917)
(9,708)
(31,369)
(15)
(135)
(18,099)
(147)
Disposal of property, plant and equipment
3,291
2,251
3,352
2,604
Investment in associates and subsidiaries
(2,556)
(822)
146
986
Bank deposits
10,258
1,080
10,267
1,083
98
307
110
319
6,051
(26,236)
(13,932)
(26,524)
-
13,196
-
13,196
Term loans and finance leases
23,807
12,653
28,740
12,538
Short term loans
(7,400)
(250)
(2,373)
(250)
Bank borrowings
(25,022)
29,619
(26,745)
28,345
Interest expenses
(9,853)
(9,385)
(10,481)
(9,897)
Dividend paid
(3,775)
(5,775)
(3,809)
(5,775)
Net cash (used in)/generated from financing activities
(22,243)
40,058
(14,668)
38,157
Net (decrease)/increase in cash and bank balances
(3,434)
2,433
(3,524)
2,624
Cash and bank balances at beginning of the year
4,169
1,736
6,092
3,468
735
4,169
2,568
6,092
Purchases of intangible assets
Interest income
Net cash generated from/(used in) investing activities
Financing Activities
Share capital raised
Cash and bank balances at end of the period
The attached notes 1 to 39 form part of these consolidated financial statements.
Galfar Engineering & Contracting SAOG & Subsidiaries
Statement of Changes in Equity - Parent Company
For the year ended 31st December, 2014
Amount in RO '000s
Attributable to equity holders of the parent company
Share
Premium
Statutory
Reserve
Retained
Earnings
33,000
16,503
11,000
30,964
91,467
-
-
-
6,891
6,891
4,747
8,449
-
-
13,196
14,15
-
(1,582)
1,582
-
-
17
-
-
-
(5,775)
(5,775)
4,747
6,867
1,582
(5,775)
7,421
37,747
23,370
12,582
32,080
105,779
-
-
-
1,209
1,209
-
-
-
(3,775)
(3,775)
37,747
23,370
12,582
29,514
103,213
Notes
Balance as at 1 January, 2013
Share Capital
Total
Comprehensive income:
Profit and total comprehensive income for the year
Transactions with shareholders
Share capital raised by way of right issue
Transfer to statutory reserve
Dividend paid - 2012
13
Total transactions with shareholders
Balance as at 1 January, 2014
Comprehensive income:
Profit and total comprehensive income for the year
Transactions with shareholders
Dividend paid - 2013
Balance as at 31 December, 2014
17
The attached notes 1 to 39 form part of these consolidated financial statements.
Galfar Engineering & Contracting SAOG & Subsidiaries
Statement of Changes in Equity - Consolidated
For the year ended 31st December, 2014
Amount in RO '000s
Notes
Balance as at 1 January, 2013
Share
Capital
Attributable to equity holders of the parent company
Foreign
Share
Statutory
Retained
Currency
Premium
Reserve
Earnings
Translation
Total
Non
controlling
interest
Grand
Total
33,000
16,503
11,106
(1,019)
31,420
91,010
848
91,858
-
-
-
-
7,533
7,533
51
7,584
-
-
-
(769)
-
(769)
-
(769)
-
-
-
(769)
7,533
6,764
51
6,815
4,747
8,449
-
-
-
13,196
-
13,196
-
(1,582)
1,782
-
(200)
-
-
-
-
-
-
-
-
-
87
87
-
-
-
-
(5,775)
(5,775)
-
(5,775)
4,747
6,867
1,782
-
(5,975)
7,421
87
7,508
37,747
23,370
12,888
(1,788)
32,978
105,195
986
106,181
-
-
-
-
169
169
28
197
-
-
-
(71)
-
(71)
-
(71)
-
-
-
(71)
169
98
28
126
-
-
(115)
-
111
(4)
-
(4)
Comprehensive income:
Profit for the year
Other comprehensive income:
Foreign currency translation reserve
16
Total comprehensive income for the year
Transactions with shareholders:
Share capital raised by way of right issue
Transfer to statutory reserve
13,14
15
Non-controlling interest in new subsidiary
Dividend paid -2012
17
Total transactions with shareholders
Balance as at 1 January, 2014
Comprehensive income:
Profit for the year
Other comprehensive income:
Foreign currency translation reserve
16
Total comprehensive income for the year
Transactions with shareholders:
Adjustment of earlier year in subsidiary companies
Transfer to statutory reserve
15
-
-
62
-
(62)
-
-
-
Dividend paid -2013
17
-
-
-
-
(3,775)
(3,775)
(34)
(3,809)
-
-
(53)
-
(3,726)
(3,779)
(34)
(3,813)
37,747
23,370
12,835
(1,859)
29,421
101,514
980
102,494
Total transactions with shareholders
Balance as at 31 December, 2014
The attached notes 1 to 39 form part of these consolidated financial statements.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
1. Activities
Galfar Engineering and Contracting SAOG (“the parent company”) is an Omani joint stock company registered under the Commercial Companies Law of
the Sultanate of Oman and listed in Muscat Security Exchange.
The principal activities of Galfar Engineering and Contracting SAOG and its subsidiaries (“the group”) are road, bridge and airport construction, oil and gas
including EPC works, civil and mechanical construction, public health engineering, electrical, plumbing and maintenance contracts and Design,
Build,Finance, Operate and Transfer (DBFOT) projects.
2. Significant Accounting Policies
Basis of preparation
These consolidated financial statements are prepared on the historical cost basis, as modified by the revaluation of derivative financial instruments at fair
value through statement of comprehensive income , available-for-sale financial assets that have been measured at fair value and in accordance with
International Financial Reporting Standards (IFRS), the requirements of the Commercial Companies Law of the Sultanate of Oman, 1974 (as amended)
and comply with the disclosure requirements set out in the ‘Rules and Guidelines on Disclosure by issuer of Securities and Insider Trading’ issued by the
Capital Market Authority (CMA) of the Sultanate of Oman.
The preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions that affect the
reported amount of financial assets and liabilities at the date of the financial statements and the resultant provisions and changes in fair value for the year.
Such estimates are necessarily based on assumptions about several factors involving varying, and possibly significant, degrees of judgment and
uncertainty and actual results may differ from management’s estimates resulting in future changes in estimated assets and liabilities. The assumptions
concerning the key sources of estimation uncertainty at the reporting date are set out in note 38.
These consolidated financial statements have been presented in Rial Omani which is the functional and reporting currency for these consolidated financial
statements and all values are rounded to nearest thousand (RO '000) except when otherwise indicated.
Change in accounting policy estimates and disclosures
The accounting policies are consistent with those used in the previous financial year except for below;
In the current year, the company has changed the method of recognising the contract revenue from 'surveys of work performed method' to ‘percentage
completion method’. Hence from 2014, the company uses the ‘percentage of completion method’ to determine the appropriate amount of contract revenue
to be recognised in a given period. The stage of completion is measured by reference to the contract costs incurred up to the reporting date as a
percentage of total estimated costs for each contract.
The Company has considered the above to be a 'change in accounting estimate'. Accordingly, the effect of this change has been recognised
prospectively in the financial statements, in line with IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors. The amount of effect in the
current period and the future periods have not been disclosed in these financial statements due to its impracticability.
Standards and amendments effective in 2014 and relevant for the group’s operations:
For the year ended 31 December 2014, the group has adopted all of the new and revised standards and interpretations issued by the International
Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its
operations and effective for periods beginning on 1 January 2014.
The adoption of these standards and interpretations has not resulted in changes to the group’s accounting policies and has not affected the amounts
reported for the current year.
Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the group:
The following standards, amendments and interpretations to existing standards have been published and are mandatory for the group’s accounting
periods beginning on or after 1 January 2015 or later periods, but the group has not early adopted them and the impact of these standards and
interpretations is not reasonably estimable as at 31 December 2014:
IFRS 9, ‘Financial instruments’, (effective on or after 1 January 2015); and
IFRS 15, ‘Revenue from contracts with customers’ (effective on or after 1 January 2017);
Accounting Policies
The significant accounting policies adopted by the group are as follows:
Basis of consolidation
The consolidated financial statements comprise those of Galfar Engineering and Contracting SAOG, its subsidiaries and its associates as at closing of
each period. A subsidiary is a company in which the parent company owns, directly or indirectly more than half of the voting power.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
2. Significant Accounting Policies (continued)
Basis of consolidation (continued)
The subsidiary is consolidated from the date on which control is transferred to the group and ceases to be consolidated from the date on which control is
transferred out of the group.
The financial statements of the subsidiary are prepared for the same reporting period as the parent company using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies which may exist.
All intercompany balances, income and expenses, unrealised gains and losses and dividends resulting from intra-group transactions are eliminated.
A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction.
Losses are attributed to the non-controlling interest even if that results in a deficit balance.
If the group loses control over a subsidiary, it:
• Derecognises the assets (including goodwill) and liabilities of the subsidiary
• Derecognises the carrying amount of any non-controlling interests
• Derecognises the cumulative translation differences, recorded in equity
• Recognises the fair value of the consideration received
• Recognises the fair value of any investment retained
• Recognises any surplus or deficit in profit or loss
• Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss
In the parent company’s separate financial statements, the investment in the subsidiary is carried at cost less impairment.
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration
transferred, measured at the acquisition date fair value, and the amount of any non-controlling interest in the acquiree. For each business combination,
the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets.
Acquisition costs incurred are expensed and included in administrative expenses.
When the group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance
with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded
derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is
remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value
of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in profit or loss or as a
change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within
equity.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling
interest, over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the
subsidiary acquired, the difference is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in
a business combination is, from the acquisition date, allocated to each of the group’s cash-generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed off, the goodwill associated with the operation
disposed off is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this
circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
2. Significant Accounting Policies (continued)
Business combinations and goodwill (continued)
Changes in ownership interests in subsidiaries without change of control:
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the
owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of
net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
Disposal of subsidiaries:
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the
owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of
net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
Investments in associates
The group’s investments in its associates are accounted for under the equity method of accounting. In the parent company's separate financial
statements, the investment in an associate is carried at cost less impairment. An associate is an entity in which the group has significant influence and
which is neither a subsidiary nor a joint venture.
Under the equity method, the investment in the associate is carried in the statement of financial position at cost plus post- acquisition changes in the
group’s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment. After application of the
equity method, the group determines whether it is necessary to recognise any additional impairment loss with respect to the group’s net investment in the
associate. The statement of comprehensive income reflects the share of the results of operations of the associate. Where there has been a change
recognised directly in the equity of the associate, the group recognises its share of any changes and discloses this, when applicable, in the statement of
changes in equity. Profits and losses resulting from transactions between the group and the associate are eliminated to the extent of the interest in the
associate.
The financial statements of the associates are prepared for the same reporting period as the parent company using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies which may exist.
Property, plant and equipment
All items of property, plant and equipment held for the use of group’s activities are recorded at cost less accumulated depreciation and any identified
impairment loss. Land is not depreciated. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for longterm construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at
intervals, the group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection
is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other
repair and maintenance costs are recognised in the statement of comprehensive income as incurred.
Depreciation is charged so as to write off the cost of property, plant and equipment over their estimated useful lives, using the straight line method, on the
following bases:
Buildings
Camps
Plant and machinery
Motor vehicles and heavy equipment
Furniture and office equipment
Project equipment and tools
15 years
4 years
7 & 10 years
7 & 10 years
6 years
6 years
Items costing less than RO 100 are expensed out in the year of purchase.
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end. Where the carrying value of an asset is
greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
2. Significant Accounting Policies (continued)
Property, plant and equipment (continued)
An item of property, plant and equipment and any significant part initially recognised 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, calculated as the difference between the net disposal
proceeds and the carrying amount of the asset is recognised in the statement of comprehensive income when the asset is derecognised.
Capital work in progress
Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any
recognised impairment loss. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their
intended use.
Intangible assets
Computer software:
Computer software costs that are directly associated with identifiable and unique software products and have probable economic benefits exceeding the
costs beyond one year are recognised as an intangible asset. Direct costs include staff costs of the software development team and an appropriate portion
of relevant overheads. Computer software costs recognised as an asset are amortised using the straight-line method over the estimated useful life of five
years.
Concessionaire rights:
Concessionaire rights arising from Design, Build, Finance, Operate and Transfer (DBFOT) road projects are shown at historical cost. These have a finite
useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of intangible
assets over their lease period and is recognised in the statement of comprehensive income.
Available-for-sale investments
Available-for-sale investments are initially recognised at cost, which includes transaction costs, and are, in general, subsequently carried at fair
value. Available-for-sale equity investments that do not have a quoted market price in an active market, and for which other methods of reasonably
estimating fair value are inappropriate, are measured at cost, as reduced by allowances for estimated impairment. Changes in fair value are reported
as other comprehensive income.
An assessment is made at each reporting date to determine whether there is objective evidence that an investment may be impaired. If such evidence
exists, any impairment loss (being the difference between cost and fair value, less any impairment loss previously recognised) is removed from other
comprehensive income and recognised in the income statement.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises purchase price and all direct costs incurred in bringing the inventories
to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price
less all estimated costs to be incurred in marketing, selling and distribution. Provision is made where necessary for obsolete, slow moving and defective
items.
Impairment of non-financial assets
At each reporting date, the group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss,
if any. For the purpose of assessing the impairment, assets are grouped at the lowest level for which they are largely independent cash flows (cash
generating units).An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is
determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of
assets.
The loss arising on an impairment of an asset is determined as the difference between the recoverable amount and carrying amount of the asset and is
recognised immediately in the statement of comprehensive income.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
2. Significant Accounting Policies (continued)
Impairment of non-financial assets (Continued)
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or
may have decreased. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its
recoverable amount and the increase is recognised as income immediately, provided that the increased carrying amount does not exceed the
carrying amount that would have been determined, had no impairment loss been recognised earlier.
At the time of assessing the impairment on its investments in associates, the group determines, after application of the equity method, whether it is
necessary to recognise an additional impairment loss of the group’s investment in its associates. The group determines at each reporting date whether
there is any objective evidence that the investment in associate is impaired. If this is the case the group calculates the amount of impairment as being the
difference between the fair value of the associate and the acquisition cost and recognises the amount in the statement of comprehensive income.
Financial instruments
Financial assets and financial liabilities are recognised on the group’s statement of financial position when the group becomes a party to the contractual
provisions of the instrument.
The principal financial assets are trade and other receivables, term deposits, available for sale investments and cash and bank balances.
The principal financial liabilities are trade payables, liabilities against finance leases, term loans, bank borrowings and overdrafts.
Derivative financial instruments
Derivatives are initially recognised at cost on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Changes in
the fair value of derivative instruments are recognised immediately in the statement of comprehensive income.
Trade and other receivables
Trade receivables are amounts due from customers for billing in the ordinary course of business for construction contracts. If collection is expected in one
year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current
assets.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment.
A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest rate.
Term deposits
Term deposits are carried on the statement of financial position at their principal amount.
Cash and cash equivalents
For the purpose of the cash flows statement, the group considers cash on hand and bank balances with a maturity of less than three months from the date
of placement as cash and cash equivalents.
Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are
presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Interest-bearing loans and borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are classified as current liabilities unless the company has an
unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
2. Significant Accounting Policies (continued)
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get
ready for its intended use or sale are capitalised as part of the cost of the respective assets untill such time as the assets are substantially ready for their
intended use. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in
connection with the borrowing of funds.
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date: whether fulfillment
of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.
For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the transitional
requirements of IFRIC 4.
Group as a lessee
Finance leases, which transfer to the group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the
commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are
apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are recognised in the statement of comprehensive income.
Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the group will obtain ownership by the end
of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Derecognition of financial assets and liabilities
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:
- The rights to receive cash flows from the asset have expired; or
- The group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a ‘pass-through’ arrangement; and either:
- The group has transferred substantially all the risks and rewards of the asset, or
- The group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is
replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange
or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying
amounts is recognised in the statement of comprehensive income.
Impairment of financial assets
The group assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial
asset or a group of financial assets is impaired and an impairment loss is incurred if, and only if, there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated
future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Impairment is determined as follows:
(a) For assets carried at fair value, impairment is the difference between cost and fair value;
(b) For assets carried at cost, impairment is the difference between cost and the present value of future cash flows discounted at the current market rate
of return for a similar financial asset.
(c) For assets carried at amortised cost, impairment is the difference between carrying amount and the present value of future cash flows discounted at
the original effective interest rate.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
2. Significant Accounting Policies (continued)
Offsetting
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position only when there is a legally
enforceable right to set off the recognised amounts and the group intends to either settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Provisions
Provisions for environmental restoration, restructuring costs and legal claims 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.
Restructuring provisions comprise lease termination penalties and employee termination payments. 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 and the risks specific to the obligation.
Provision for employees’ benefits
Termination benefits for Omani employees are contributed in accordance with the terms of the Social Securities Law of 1991.
End of service benefits are accrued in accordance with the terms of employment of the group's employees at the reporting date, having regard to the
requirements of the applicable labour laws of the countries in which the group operates and in accordance with IAS 19. Employee entitlements to annual
leave and leave passage are recognised when they accrue to employees and an accrual is made for the estimated liability arising as a result of services
rendered by employees up to the reporting date. These accruals are included in current liabilities, while that relating to end of service benefits is disclosed
as a non-current liability.
Dividend on ordinary shares
Dividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the company’s shareholders.
Taxation
Current income tax
Taxation is provided based on relevant laws of the respective countries in which the group operates. Current income tax assets and liabilities for the
current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.
Deferred taxation
Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to
the period when the asset is realised or the liability is settled, based on laws that have been enacted at the reporting date.
Deferred income tax assets are recognised for all deductible temporary differences and carry-forward of unused tax assets and unused tax losses to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets
and unused tax losses can be utilised.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
2. Significant Accounting Policies (continued)
Taxation (continued)
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date
and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the
underlying transaction either in other comprehensive income or directly in equity.
Contract revenue and profit recognition
A construction contract is defined by IAS 11 as a contract specifically negotiated for the construction of an asset.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that
are likely to be recoverable. When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable,
contract revenue is recognised over the period of the contract. When it is probable that total contract costs will exceed total contract revenue, the expected
loss is recognised as an expense immediately. Contract revenue corresponds to the initial amount of revenue agreed in the contract and any variations in
contract work, claims and incentive payments to the extent that it is probable that they will result in revenue, and they can be reliably measured.
A variation is included in contract revenue when:
(a) it is probable that the customer will approve the variation and the amount of revenue arising from the variation; and
(b) the amounts of revenue can be reliably measured.
Claims are included in contract revenue only when:
(a) negotiations have reached an advanced stage such that it is probable that the customer will accept the claim; and
(b) the amount that it is probable will be accepted by the customer can be measured reliably.
Incentive payments are included in contract revenue when:
(a) the contract is sufficiently advanced that it is probable that the specified performance standards will be met or exceeded; and
(b) the amount of the incentive payment can be measured reliably.
The company uses the ‘percentage of completion method’ to determine the appropriate amount to recognise in a given period. The stage of completion is
measured by reference to the contract costs incurred up to the reporting date as a percentage of total estimated costs for each contract. Costs incurred in
the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. They are presented as
inventories, prepayments or other assets, depending on their nature.
Contract work in progress
Work in progress on long term contracts is calculated at cost plus attributable profit, to the extent that this is reasonably certain after making provision for
contingencies, less any losses foreseen in bringing contracts to completion and less amounts received and receivable as progress payments. These are
disclosed as 'Due from customers on contracts'. Cost for this purpose includes direct labour, direct expenses and an appropriate allocation of overheads.
For any contracts where receipts plus receivables exceed the book value of work done, the excess is included as ' Due to customers on contracts' in
accounts payable and accruals.
Sales and service income
Revenue from sales of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of
revenue can be measured reliably.
Revenue from rendering of services is recognised when the outcome of the transaction can be estimated reliably, by reference to the stage of completion
of the transaction at the reporting date.
Contract costs
Contract costs include costs that relate directly to the specific contract and costs that are attributable to contract activity in general and can be allocated to
the contract. Costs that relate directly to a specific contract comprise: site labour costs (including site supervision); costs of materials used in construction;
depreciation of equipment used on the contract; costs of design, and technical assistance that is directly related to the contract.
The Group’s contracts are typically negotiated for the construction of a single asset or a group of assets which are closely interrelated or interdependent in
terms of their design, technology and function. In certain circumstances, the percentage of completion method is applied to the separately identifiable
components of a single contract or to a group of contracts together in order to reflect the substance of a contract or a group of contracts.
Contract costs are recognised as expenses in the period in which they are incurred.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
2. Significant Accounting Policies (continued)
Interest income
Interest income and expense are accounted for on an accrual basis using the effective interest rate method.
Dividend income
Dividend income is recognised when the right to receive the dividend is established.
Directors’ remuneration
The Parent Company follows the Commercial Companies Law 1974 (as amended), and other latest relevant directives issued by CMA, in regard to
determination of the amount to be paid as Directors’ remuneration. Directors’ remuneration is charged to the statement of comprehensive income in the
succeeding year to which they relate after its approval in AGM.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net
of tax, from the proceeds.
Where any group company purchases the company’s equity share capital (treasury shares), the consideration paid, including any directly attributable
incremental costs (net of income taxes) is deducted from equity attributable to the company’s equity holders 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 company’s equity holders.
Foreign currency translation
Each entity in the group determines its own functional currency and items included in the financial statements of each entity are measured using that
functional currency. Items included in the financial statements of the company are measured and presented in Rials Omani being the currency of the
primary economic environment in which the parent company operates.
Transactions in foreign currencies are initially recorded in the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the
statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined. The results of the translations in foreign currency investments of foreign subsidiaries and
associates are disclosed under other comprehensive income.
Segment reporting
A segment is a distinguishable component of the group that is engaged in providing products or services (business segment) or in providing products or
services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other
segments. The segment information is set out in note 35.
Notes to Consolidated Financial Statements
As at 31st December, 2014
3. Property, plant and equipment - Parent Company
Amount in RO '000s
Project
Capital Work-inEquipment
Progress
& Tools
Land
Building &
Camps
Costs
At 1 January 2013
Additions
Disposals
Transfers
1,278
-
25,596
849
(193)
7,152
114,450
15,832
(2,588)
-
69,955
7,941
(2,897)
-
13,772
952
(140)
-
13,818
1,254
(17)
-
At 1 January 2014
1,278
33,404
127,694
74,999
14,584
-
772
(2,040)
212
2,076
(8,055)
315
1,508
(6,525)
-
401
(5,443)
(1,386)
1,278
32,348
122,030
69,982
Depreciation
At 1 January 2013
Charge for the year
Disposals
-
18,493
1,341
(193)
59,033
11,584
(1,674)
At 1 January 2014
-
19,641
Charge for the year
Disposals/written off
-
At 31 December 2014
At 31 December, 2013
Particulars
Additions
Disposals/written off
Transfers to intangible assets
At 31 December 2014
Transfers to intangible assets
At 31 December 2014
Plant & Motor Vehicles
Machinery
& Equipment
Furniture &
Office
Equipment
Total
5,063
2,089
(7,152)
243,932
28,917
(5,835)
-
15,055
-
267,014
252
(6,888)
670
16
-
5,025
(28,951)
(189)
8,156
9,089
16
242,899
38,728
7,256
(2,133)
11,828
864
(4)
10,100
1,404
(17)
-
138,182
22,449
(4,021)
68,943
43,851
12,688
11,487
-
156,610
1,606
(2,018)
171
19,400
11,484
(6,983)
298
73,742
6,870
(5,896)
44,825
664
(5,426)
(1,323)
6,603
1,170
(6,886)
667
6,438
-
21,794
(27,209)
(187)
151,008
1,278
12,948
48,288
25,157
1,553
2,651
16
91,891
1,278
13,763
58,751
31,148
1,896
3,568
-
110,404
Net book amount
Notes to Consolidated Financial Statements
As at 31st December, 2014
3. Property, plant and equipment - Consolidated
Amount in RO '000s
Land
Building &
Camps
At 1 January 2013
Additions
Disposals
Transfers
1,278
-
25,759
853
(193)
7,152
124,540
17,614
(3,164)
-
74,221
8,683
(2,742)
-
14,071
1,083
(126)
-
At 1 January 2014
1,278
33,571
138,990
80,162
Additions
-
774
4,744
Disposals/written off
-
(2,040)
Transfers to intangible assets
-
212
1,278
Depreciation
At 1 January 2013
Charge for the year
Disposals
Project
Equipment
& Tools
Capital Workin- Progress
Total
13,932
1,298
(42)
-
5,555
1,838
(16)
(7,152)
259,356
31,369
(6,283)
-
15,028
15,188
225
284,442
3,241
455
336
158
9,708
(8,055)
(6,651)
(5,466)
(6,888)
-
(29,100)
333
-
(1,404)
670
-
(189)
32,517
136,012
76,752
8,613
9,306
383
264,861
-
18,525
1,357
(193)
63,360
12,495
(1,784)
40,391
7,715
(2,132)
11,962
899
(2)
10,108
1,414
(20)
-
144,346
23,880
(4,131)
At 1 January 2014
-
19,689
74,071
45,974
12,859
11,502
-
164,095
Charge for the period
-
1,617
12,678
7,393
693
1,190
-
23,571
Disposals/written off
-
(2,018)
(6,988)
(5,984)
(5,427)
(6,886)
-
(27,303)
Transfers to intangible assets
-
171
309
-
(1,334)
667
-
(187)
At 31 December 2014
-
19,459
80,070
47,383
6,791
6,473
-
160,176
At 31 December 2014
1,278
13,058
55,942
29,369
1,822
2,833
383
104,685
At 31 December, 2013
1,278
13,882
64,919
34,188
2,169
3,686
225
120,347
Description
Plant & Motor Vehicles
Machinery
& Equipment
Furniture &
Office
Equipment
Costs
At 31 December 2014
Net book amount
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
Parent Company
2014
2013
Consolidated
2014
2013
3. Property, plant and equipment (continued)
Capital work-in-progress represents machinery under installation in parent company and building under construction in a subsidiary company.
Land and buildings with a net book value of RO 11,674 (2013: RO 12,215) thousands have been mortgaged in favour of banks, against term
loan obtained by the company.Vehicles and equipment also have been jointly registered with banks/finance companies for insured value of
RO 121,958 (2013: RO 82,457)thousands to obtain term loan (note 18).
Depreciation of property, plant and equipment is allocated as follows:
Contract costs (note 27)
20,402
21,524
22,149
1,392
925
1,422
964
21,794
22,449
23,571
23,880
Costs
Balance at beginning of the year
Addition for the year
Written off
Transfer from property,plant and equipment
Balance at end of the year
2,693
15
(208)
189
2,689
2,558
135
2,693
2,713
18,099
(208)
189
20,793
2,566
147
2,713
Amortisation
Balance at beginning of the year
Charge for the year
Written off
Transfer from property, plant and equipment
Balance at end of the year
1,179
400
(208)
187
1,558
774
405
1,179
1,180
409
(208)
187
1,568
774
406
1,180
Net book value at end of the year
1,131
1,514
19,225
1,533
General and administrative expenses (note 28)
22,916
4. Intangible assets
The intangible assets of the parent company comprise of the computer soft ware.
The intangible assets of the group comprise of the computer soft ware and concessionaire rights under development as follows:
Computer soft ware
Concessionaire rights under
development
2014
2013
2014
2013
2,713
50
(208)
189
2,744
2,566
147
2,713
Balance at beginning of the year
Charge for the year
Written off
Transfers
Balance at end of the period
1,180
409
(208)
187
1,568
774
406
1,180
-
-
Net book value at end of the period
1,176
1,533
18,049
-
Galfar Engineering & Contracting India Pvt. Ltd.
Salasar Highways Pvt. Ltd. (i)
1,595
1,276
8
307
-
-
Al Khalij Heavy Equipment & Engineering LLC
Kashipur Sitarganj Highways Pvt. Ltd. (KSHPL) (i)
Aspire Projects & Services LLC
Galfar Mott MacDonald LLC
Galfar Training Institute LLC
Galfar Aspire Readymix LLC
Galfar Wasen Contracting Company
600
307
200
163
149
148
58
4,496
600
307
200
163
149
148
58
1,940
-
-
Costs
Balance at beginning of the year
Addition for the year (Refer note 5(1))
Written off
Transfers
Balance at end of the period
18,049
18,049
-
Amortisation
5. Investment in subsidiaries
Information of subsidiary companies is summarised below:
Shares held by parent
company
Al Khalij Heavy Equipment & Engineering LLC
Galfar Training Institute LLC
Galfar Engineering & Contracting India Pvt. Ltd.
Aspire Projects & Services LLC
Galfar Aspire Readymix LLC (ii)
Salasar Highways Pvt. Ltd. (i)
Kashipur Sitarganj Highways Pvt. Ltd. (i)
Galfar Mott MacDonald LLC
Galfar Wasen Contracting Company
52%
99%
100%
100%
99%
24%
9%
65%
65%
52%
99%
100%
100%
99%
98%
98%
65%
65%
Shares held by group
52%
100%
100%
100%
100%
100%
100%
65%
65%
52%
100%
100%
100%
100%
100%
100%
65%
65%
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
Parent Company
2014
2013
Consolidated
2014
2013
5. Investment in subsidiaries (continued)
Principal activity
Place of
incorporation
Year of
incorporation
Galfar Engineering & Contracting India Pvt. Ltd.
Salasar Highways Pvt. Ltd. (i)
Construction
Concessionaire
India
India
2009
2013
Al Khalij Heavy Equipment & Engineering LLC
Kashipur Sitarganj Highways Pvt. Ltd. (KSHPL) (i)
Aspire Projects & Services LLC
Galfar Mott MacDonald LLC
Galfar Training Institute LLC
Galfar Aspire Readymix LLC (ii)
Galfar Wasen Contracting Company
Hiring equipment
Concessionaire
Construction
EPC consultancy
Training
Manufacturing
Construction
Oman
India
2006
2013
2011
2013
2009
2012
2010
Oman
Oman
Oman
Oman
Libya
(i) Salasar Highways Pvt. Ltd. and Kashipur Sitarganj Highways Pvt. Ltd., the two companies are incorporated in India as concessionaire to
handle DBFOT road projects 'Fatehpur-Salasar highway' and 'Kashipur-Sitarganj highway' with total project costs at equivalent RO 37,750 and
RO 42,500 thousands respectively. The projects are awarded to the parent company in November, 2012 and to be executed by the subsidiary
company Galfar Engineering and Contracting India Pvt. Ltd. (GECIPL). The investment made by the parent company and GECIPL is RO
1,583 thousands and RO 7,046 thousands respectively in each company, which is part of the total investment of equivalent RO 6,318 and RO
6,929 thousands respectively. The shareholding of the parent company is reduced in both subsidiaries as investment during the year made by
GECIPL. The construction of both the project's are under progress and expected to be completed in August, 2016. Also refer note (4).
(ii) During the year, Galfar Aspire Redimix LLC where the parent company owns 99% of the issued share capital, has issued additional shares
amounting to 100 thousands by capitalising the retained earnings. No adjustments have been made in the parent company financial
statements in line with the parent company’s accounting policy to carry the investments in subsidiaries at cost less impairment.
6. Investment in associates
Galfar Engineering & Contracting Kuwait KSC (GEC) (i)
Mahakaleswar Tollways Pvt. Ltd. (MTPL) (ii)
Shree Jagannath Expressway Pvt. Ltd. (SJEPL) (ii)
Ghaziabad Aligarh Expressway Pvt. Ltd. (GAEPL) (ii)
International Water Treatment LLC (IWT) (iii)
5,323
2,255
739
344
45
8,706
5,323
2,255
739
344
45
8,706
2,590
(710)
1,427
2,010
(456)
4,861
3,229
(406)
1,608
1,983
30
6,444
Information of associate companies is summarised below:
Shares acquired by parent
company
Shares acquired by group
Galfar Engineering & Contracting Kuwait KSC (i)
26%
26%
26%
26%
Mahakaleswar Tollways Pvt. Ltd. (MTPL) (ii)
Shree Jagannath Expressway Pvt. Ltd. (SJEPL) (ii)
Ghaziabad Aligarh Expressway Pvt. Ltd. (GAEPL) (ii)
International Water Treatment LLC (iii)
26%
6%
2%
30%
26%
6%
2%
30%
26%
26%
26%
30%
26%
26%
26%
30%
Galfar Engineering & Contracting Kuwait KSC (i)
Mahakaleswar Tollways Pvt. Ltd. (MTPL) (ii)
Shree Jagannath Expressway Pvt. Ltd. (SJEPL) (ii)
Ghaziabad Aligarh Expressway Pvt. Ltd. (GAEPL) (ii)
International Water Treatment LLC (IWT) (iii)
Principal
activity
Construction
Concessionaire
Concessionaire
Concessionaire
Construction
Place of
incorporation
Kuwait
India
India
India
Oman
Year of
incorporation
2010
2010
2011
2011
2013
(i) The parent company holds 26% shareholding in this company (earlier known as 'Shaheen Al Ghanim Contracting Co. KSC'). The
company is engaged in construction activities.
(ii) The group holds 26% shareholding in these companies incorporated in India to handle DBFOT road projects. The MTPL has commenced
commercial activities in year 2011 while SJEPL and GAEPL projects are still under construction.
(iii) The parent company has acquired 30% share of this company during the year 2013. The company is incorporated in partnership with VA
Tech Wabag Ltd. of India and Cadagua SA of Spain with 32.5% and 37.5% shareholding respectively. This company has been awarded 'Al
Ghubrah Independent Water Desalination Project', which is being executed by the parent company as one of the sub-contractors.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
Parent Company
2014
2013
Consolidated
2014
2013
6. Investment in associates (continued)
The following table illustrates summarised information of the group’s investment in its associates:
Share of associates statement of financial position:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets and carrying amount of the investment
Share of associates statement of income:
Revenue
Costs of revenue
Loss for the period
10,124
54,543
(12,139)
10,667
42,097
(12,513)
(47,667)
(33,807)
4,861
6,444
18,635
20,001
(1,366)
10,708
12,326
(1,618)
Loss for the period comprises of loss from GEC, Kuwait RO 584 ( 2013 - RO 1,068) thousands, MTPL, India RO 296
RO 535) thousands and IWT, Oman RO 486 ( 2013 - RO 15) thousands.
( 2013 -
7. Inventories
Materials and consumables
Less: allowance for non-moving inventories
22,916
(1,785)
21,131
36,020
(451)
35,569
24,190
(1,811)
22,379
36,965
(477)
36,488
451
1,334
1,785
325
126
451
477
1,334
1,811
351
126
477
Work-in-progress on long term contracts at cost plus attributable
profit considered as receivables
67,557
53,582
68,743
54,737
To customers under construction contracts recorded as billings in
excess of work done (note 23)
1,470
3,692
7,713
6,169
1,162,655
(1,095,098)
67,557
1,029,690
(976,108)
53,582
1,166,071
(1,097,328)
68,743
1,040,558
(985,821)
54,737
154,627
(153,157)
1,470
307,709
(304,017)
3,692
181,117
(173,404)
7,713
323,319
(317,150)
6,169
182,382
1,491
29,289
213,162
172,119
1,089
28,261
201,469
190,647
5,951
29,372
(43)
225,927
172,871
3,713
28,783
(39)
205,328
30,816
32,246
30,896
32,246
Movement for the provision for inventories is as follows;
At the beginning of the year
Charged for the year
At the end of the year
8. Due from/(to) customers on contracts
Due from customers on construction contracts:
Revenue recognised at cost plus attributable profit
Less: Progress claims received and receivable
Due to customers on construction contracts:
Progress claims received and receivable
Less: Revenue recognised at cost plus attributable profit
9. Contract and trade receivables
Contract billed receivables
Trade receivables
Retention receivables - current
Provision for impaired debts
Retentions receivables
Non-current portion
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
Parent Company
2014
2013
Consolidated
2014
2013
10. Advances, prepayment and other receivables
Advance on sub-contracts and supplies
Advances to employees
Prepaid expenses
Due from related parties (note 33)
Insurance claims receivable
Income tax receivables
Deposits
Other receivables
Provision for impaired advances
5,316
452
4,139
11,024
606
510
47
22,094
3,947
1,078
4,411
9,414
235
496
267
19,848
6,468
458
4,247
7,570
606
2,418
544
155
(934)
21,532
4,559
1,078
4,526
7,827
235
2,045
522
289
(274)
20,807
1,293
1,293
11,551
11,551
1,293
31
1,324
11,551
40
11,591
11. Deposits with bank
Short term deposits
Margin deposits
The term deposits carry interest rates of 1.0% to 2.0% (2013 - 1% to 2%) per annum and are kept for a period three to twelve months from
date of placement.
12. Cash and bank balances
Cash in hand
Bank balances with current accounts
204
531
735
271
3,898
4,169
223
2,345
2,568
300
5,792
6,092
50,000
50,000
50,000
50,000
37,747
-
33,000
4,747
37,747
-
33,000
4,747
37,747
37,747
37,747
37,747
13. Share capital
Authorised:
500,000,000 (2013: 500,000,000) ordinary shares of par
value RO 0.100 (2013: RO 0.100) each
Issued and fully paid:
Balance at beginning of the year
Proceeds from 47,468,761 shares issued during the year
Balance at end of the period
At the reporting date, the issued and fully paid share capital comprises of 377,468,761 (2013: 377,468,761) shares having a par value of RO
0.100 (2013: RO 0.100) each. Pursuant to the terms of its IPO, as detailed below, the share capital of the Company has been divided into two
classes comprising of 263,618,761 (2013: 263,618,761) ordinary shares and 113,850,000
(2013: 113,850,000) preferential voting
rights shares. The preferential voting rights shares are held by the promoting shareholders and carry two votes at all general meetings while
otherwise ranking pari-passu with ordinary shares in all rights including the dividend receipt.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
Parent Company
2014
2013
Consolidated
2014
2013
14. Share premium
During the year the company has not issued any right shares to the shareholders.
However during the last year, the company has has issued 47,468,761 right shares to shareholders at RO 0.280 with a nominal value of RO
0.100 and a share premium of RO - RO 0.180. An amount of RO 13,196 thousands were collected comprising nominal value RO 4,747
thousands and share premium of RO 8,449 thousands. An amount of RO1,582 thousands during the last year were transferred to statutory
reserve account from Share premium.
This reserve is available for distribution to the members.
15. Statutory reserve
As required by the Commercial Companies Law of Oman, the statutory reserve is to be maintained at least one third of the issued share
capital.
16. Foreign currency translation reserve
Foreign currency translation reserve represents impact of translation of subsidiaries and associates financial statement figures in foreign
currency to functional currency of the parent company as allowed under IAS 21.
17. Dividend
For the previous year 2013, a cash dividend of RO 0.010 per ordinary shares totaling RO 3,775 thousands proposed by the Board of Directors
was approved at Annual General Meeting of the company held on 26th March, 2014 and subsequently credited to shareholders' account
during the year.
For the year 2014, a stock dividend of 10% totalling to 37,747 thousands shares of RO 0.100 each has been proposed out of share premium
in the Board meeting on 7 March, 2015 to be approved at Annual General Meeting of the parent company to be held on 25 March, 2015.
18. Term loans
Term loans:
- from banks
- finance companies
Current portion
- from banks
- finance companies
Non-current portion
- from banks
- finance companies
89,665
10,917
100,582
64,281
12,494
76,775
94,449
12,121
106,570
64,281
13,549
77,830
28,108
4,272
32,380
26,179
4,446
30,625
28,342
4,640
32,982
26,179
4,937
31,116
61,557
6,645
68,202
38,102
8,048
46,150
66,107
7,481
73,588
38,102
8,612
46,714
32,380
27,002
41,200
100,582
30,625
18,536
27,614
76,775
32,982
27,589
45,999
106,570
31,116
18,856
27,858
77,830
The term loans are repayable as follows:
Within one year
In the second year
In the third year onwards
The long term loans are stated at the proceeds received net of repayments and amounts repayable within next twelve months have been
shown as a current liability. The term loans from banks are secured against the contract assignments and/or joint registration of
vehicle/equipment. The term loans from finance companies are secured against the jointly registered vehicle/equipment. Also refer note 3 for
land and buildings mortgaged in favour of a comemcial bank against term loan obtained by the company.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
Parent Company
2014
2013
Consolidated
2014
2013
18. Term loans (continued)
The interest rates on term loans were as follows:
Current period
Floating rate loans
Fixed interest rate loans
Previous period
LIBOR + 2.0%
4.25% to 7.0%
LIBOR + 2.0%
4.5% to 7.0%
19. Short term loans
- from banks
28,000
35,400
33,027
35,400
Bank short term loans are repayable in one year and are secured against the contract assignments and/or joint registration of
vehicle/equipment. The interest rates on these loans vary between 4.0% to 4.75% (2013: 4.0% to 5.0%) per annum.
20. Bank borrowings
Bank overdrafts
Loan against trust receipts
Bills discounted
6,950
48,491
7,250
62,691
10,093
77,620
87,713
7,762
48,491
7,250
63,503
12,628
77,620
90,248
Bank borrowings are repayable on demand or within one year. The interest rates on bank borrowings vary between 4.0% to 5.5% (2013: 4.0%
to 7%) per annum. Bank borrowings are secured against the contract assignments and/or joint registration of vehicle/equipment.
21. Trade payables
Sundry creditors
Provision for purchases and sub-contracts
46,318
31,189
77,507
58,619
33,059
91,678
55,256
31,788
87,044
62,416
33,755
96,171
10,919
2,084
(1,937)
11,066
8,658
2,619
(358)
10,919
11,067
2,213
(2,027)
11,253
8,788
2,724
(445)
11,067
32,776
9,926
6,637
2,006
1,980
1,034
1,470
891
56,720
28,453
9,564
6,957
1,941
1,830
1,993
3,692
903
55,333
35,798
13,021
6,664
2,200
2,422
1,139
7,713
1,202
70,159
28,481
9,789
7,007
2,013
2,218
1,995
6,169
1,647
59,319
16,146
9,450
17,744
9,450
22. Employees’ end of service benefits
Balance at beginning of the year
Charge for the year
Paid during the year
Balance at end of the year
23. Other payables and provisions
Advances from customers - current
Accrued expenses
Provision for employees’ leave pay and passage
Retention on sub-contracts
Due to related parties (note 33)
Creditors for capital purchases -current portion
Due to customers on contracts (note 8)
Other payables
Advance payables
Non-current portion
Advances from customers which can be adjusted against the estimated amounts to be billed in next 12 months are considered as current
advances.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
Parent Company
2014
2013
Consolidated
2014
2013
24. Taxation
Income tax is provided for parent company and Omani subsidiaries as per the provisions of the 'Law of Income Tax on Companies' in Oman
@ 12% of taxable profit after adjusting non-assessable and disallowable items and statutory exemption of RO 30,000. It is provided for Indian
subsidiary as per 'Income tax Act' in India @ 33% of taxable profit after adjusting non-admissible expenses and depreciation difference.
Income tax expense
Current tax charge for current year
Deferred tax credit for current year
Current tax credit for prior years
Deferred tax charge for prior years
1,045
(860)
185
1,240
(221)
1,019
1,397
(670)
(4)
3
726
2,284
(28)
(31)
31
2,256
7,910
946
73
1,019
923
494
232
726
9,840
2,120
136
2,256
The reconciliation between tax on accounting profit and tax profit is as follows:
Profit before tax
Tax on accounting profit
Tax effect on non admissible expenditure and adjustments
1,394
164
21
185
Provision for tax
The parent company income tax assessment up to the year 2008 has been finalised by the taxation department. During the year 2014, parent
company income tax assessment for the years 2008 has been completed and the resulted additional tax liability was immaterial. The income
assessments of the subsidiaries are at various stages of completion. The management believes that any taxation for the unassessed years
will not be material to the financial position of the Group as at the reporting date. The status of tax provision is as follows:
Balance at beginning of the year
Charge during the period
Tax paid during the year
Balance at end of the year
1,177
1,045
(1,049)
1,173
1,482
1,240
(1,545)
1,177
2,787
1,397
(331)
3,853
2,003
2,253
(1,469)
2,787
Deferred tax liability
Deferred income taxes are calculated on all temporary differences under the balance sheet liability method using a principal tax rate as per tax
law of the respective country.
Balance at beginning of the year
(Credit) /charge during the year
Balance at end of the year
6,899
(860)
6,039
7,120
(221)
6,899
7,305
(667)
6,638
7,302
3
7,305
The net deferred tax liability and deferred tax charge/(release)in the comprehensive income statement are attributable to following items:
Deferred tax liability:
Property, plant and equipment:
Balance at beginning of the year
(Release)/charged to income statement
Balance at end of the year
Deferred tax asset:
Trade receivables and inventories:
Balance at beginning of the year
Release to income statement
Balance at end of the year
Net deferred tax liability
6,953
(700)
6,253
7,159
(206)
6,953
7,314
(507)
6,807
7,296
18
7,314
(54)
(160)
(214)
6,039
(39)
(15)
(54)
6,899
(9)
(160)
(169)
6,638
6
(15)
(9)
7,305
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
Parent Company
2014
2013
Consolidated
2014
2013
25. Sales and services income
Sales and services
Hiring services
Training services
2,024
958
2,982
1,407
690
2,097
12,014
2,738
476
15,228
5,244
2,507
934
8,685
1,549
38
1,425
3,012
437
1,197
1,634
1,555
1,484
3,039
453
1,391
1,844
111,600
99,187
53,527
20,402
18,180
14,375
13,868
4,326
335,465
121,814
105,624
54,196
21,524
20,529
15,982
17,576
10,272
367,517
115,733
103,031
52,951
22,149
19,518
14,973
15,536
5,070
368
741
350,070
122,984
109,233
55,290
22,916
21,911
16,580
19,457
11,306
272
308
380,257
5,035
4,357
3,740
3,250
2,045
1,792
1,105
1,079
679
400
386
274
200
153
237
24,732
14,375
10,357
5,490
5,042
3,660
3,293
1,973
1,330
1,118
2,205
695
611
410
846
204
165
344
27,386
15,982
11,404
6,139
4,640
3,959
3,364
2,123
1,831
1,187
1,314
695
474
415
287
200
161
343
660
27,792
14,973
12,819
6,171
5,266
3,848
3,440
1,984
1,370
1,178
2,297
743
686
436
964
204
169
470
313
29,539
16,580
12,959
26. Other income
Gain on sale of property,plant and equipment
Dividend income
Miscellaneous income
27. Contract and other direct costs
Materials
Manpower costs (note 29)
Sub-contracting costs
Depreciation (note 3)
Plant and equipment repair and maintenance
General and administrative expenses (note 28)
Fuel expenses
Plant and equipment hiring costs
Training expenses
Duties and taxes
28. General and administrative expenses
Manpower costs (note 29)
Rent
Insurance charges
Electricity and water charges
Bank guarantee and other charges
Depreciation and amortisation (note 3 and 4)
Communication expenses
Professional and legal charges
Repairs and maintenance -others
Traveling expenses
Printing and stationery
Business promotion
Directors expenses
Tender fees
Miscellaneous expenses
Debts and advances impaired
Pertaining to contract and other direct costs (note 27)
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
Parent Company
2014
2013
Consolidated
2014
2013
29. Manpower costs
Salary and wages
Employees service benefits
Camp and catering expenses
Hired salary and wages
Staff incentives
Other expenses
Pertaining to cost of contract and sales (note 27)
Pertaining to general and administration expenses (note 28)
73,731
12,144
12,049
2,996
3,302
104,222
99,187
5,035
79,494
12,992
10,921
2,435
2,804
2,468
111,114
105,624
5,490
76,891
12,600
12,606
3,413
234
3,426
109,170
103,031
6,139
82,696
13,368
11,328
2,632
2,896
2,484
115,404
109,233
6,171
9,853
(98)
9,755
9,385
(307)
9,078
10,481
(110)
10,371
9,897
(319)
9,578
30. Financing costs, net
Interest expense
Interest income
31. Earnings per share
The basic earnings per share is calculated by dividing the profit for the period attributable to the shareholders of the parent company by the
weighted average number of shares outstanding during the year as follows:
Profit for the year
Weighted average number of shares in '000 (note 13)
Basic earnings per share (RO)
1,209
377,470
0.003
6,891
377,470
0.018
197
377,470
-
7,584
377,470
0.020
The diluted earnings per share is identical to the basic earnings per share as there are no potential dilutive shares at the reporting date.
32. Net assets per share
Net assets per share is calculated by dividing the equity attributable to shareholders of the parent company at the reporting date by the
number of shares outstanding as follows:
Net assets
Number of shares outstanding at the year end in '000
13)
Net assets per share (RO)
(note
103,213
105,779
101,514
105,195
377,470
377,470
377,470
377,470
0.273
0.280
0.269
0.279
33. Related party transactions
Related parties comprise the directors and business entities in which they have the ability to control or exercise significant influence in
financial and operating decisions.
The group maintains significant balances with these related parties which arise in the normal course of business from commercial
transactions, and are entered into at terms and conditions which the management consider to be comparable with those adopted for arm’s
length transactions with third parties.
The following is a summary of significant transactions with related parties which are included in the financial statements:
Contract income
Sales and services
Sale of property, plant and equipment
Purchase of property, plant and equipment
Purchase of goods and services
Director's remuneration
2,835
2,001
617
169
16,949
200
1,124
1,975
719
312
18,950
200
18,457
2,009
617
169
16,949
200
14,595
1,985
719
312
19,016
200
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
Parent Company
2014
2013
Consolidated
2014
2013
33. Related party transactions (continued)
Balances of related parties recognised and disclosed in notes 10 and 23 respectively are as follows:
Due from shareholders
Due from subsidiary and associate companies
Due from other related parties
Due to shareholders
Due to subsidiary and associate companies
Due to other related parties
171
8,254
2,599
11,024
150
6,890
2,374
9,414
171
4,799
2,600
7,570
150
5,303
2,374
7,827
156
322
1,502
1,980
168
195
1,467
1,830
156
764
1,502
2,422
168
582
1,468
2,218
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
Group, directly or indirectly, including any director (whether executive or otherwise).
The remuneration of the members of key management during the year was as follows:
Short term benefits
Post employment benefits
505
30
535
613
29
642
997
30
1,027
1,036
29
1,065
167,018
27,021
25,727
10,895
260
230,921
167,927
20,383
37,950
1,478
227,738
167,483
75,396
25,727
10,895
260
279,761
171,882
68,758
26,822
1,701
269,163
34. Commitments and contingencies
Bonds and guarantees
Corporate guarantees
Letter of credit
Forex forward contracts
Capital commitments
The parent company has provided corporate guarantees for subsidiaries and associates amounting to RO 8,334 (2013: RO 1,696)
thousands and RO 18,687 (2013: RO 18,687) thousands respectively. The parent company does not anticipate any material liability to arise
from these guarantees.
The parent company has provided support sponsor's undertakings for any shortfall in project funding and toll collection of all concessionaire
companies (MTPL, SJEPL, GAEPL, KSHPL and SHPL) for DBFOT road projects in India, on joint and several basis.The contingent liability for
the same is not determinable.
Legal cases
The parent company and its subsidiaries, in common with the significant majority of contractors, is subject to litigation in the normal course of
its business. The parent company and its subsidiaries, based on independent legal advice, does not believe that the outcome of these court
cases will have a material impact on the group’s income or financial condition.
Penalties
Penalties amounting to RO 9,203 (2013: RO 9,203) thousands have been levied on the parent company. The penalties are countered by the
extension of time and other claims from the parent company. The cases are under various stages of negotiations /arbitrations and expected
to be settled during the current year. Accordingly management believes that no liability is expected to ultimately arise and therefore no
provision for any financial effect that may arise has been included in these financial statements.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
For the year ended 31st December, 2014
35. Business segments
The Group operates in two geographical segments, Sultanate of Oman and India.
Segmental information is presented in respect of the Group’s business segments. Business segment is based on the Group’s management and internal reporting structure. Segment results, assets and
liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
The group business is divided in four segments - construction, manufacturing, hiring of equipment and training of personnel. The principal activities of the group are road, bridge and airport construction,
oil and gas including EPC works, civil and mechanical construction, public health engineering, electrical, plumbing and maintenance contracts. The other activities are hiring out of cranes, equipment and
other vehicles and training of drivers, operators, manufacturing of readymix concrete and others.
The financial results, assets and liabilities of business segments are as follows:
Amount in RO '000s
Construction
December
December
2014
2013
Manufacturing
December December
2014
2013
Hiring
December December
2014
2013
Training
December December
2014
2013
Inter segments
December
December
2014
2013
Consolidated
December
December
2014
2013
Segment revenue and expenses
Segment revenue
371,742
409,322
17,381
15,474
1,814
1,858
476
934
(18,903)
(15,180)
372,510
412,408
Segment expenses
370,192
400,313
16,327
14,391
1,753
1,751
602
929
(16,560)
(12,560)
372,313
404,824
1,550
9,009
1,054
1,083
61
107
(126)
5
(2,343)
(2,620)
197
7,584
Segment results
Segment assets and liabilities
Segment assets
514,568
496,539
6,387
4,641
2,893
3,138
133
178
(21,696)
(8,738)
502,285
495,758
Segment liabilities
394,736
385,064
3,879
3,184
1,021
1,254
155
75
-
-
399,791
389,577
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
36. Financial instruments and related risk management
The Group’s principal financial liabilities other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose
of these financial liabilities is to raise finances for the Group’s operations. The Group has loans and other receivables, trade and other
receivables, and cash and short-term deposits that arrive directly from its operations. The Group also holds available-for-sale investments.
The Group’s activities expose it to various financial risks, primarily being, market risk (including currency risk, interest rate risk, and price
risk), credit risk and liquidity risk. The Group’s risk management is carried out internally in accordance with the policies approved by the
Board of Directors.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market prices comprise three types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity risk.
Financial instruments affected by market risk include loans and borrowings, deposits, available-for-sale investments, and derivative financial
instruments
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates.
The Group is exposed to interest rate risk on its interest bearing assets and liabilities (short term bank deposits, held to maturity investments,
bank borrowings and term loans). The management manages the interest rate risk by constantly monitoring the changes in interest rates
and availing lower interest bearing facilities.
As at the reporting date, had the interest rate were to move up or down by 1%, the impact on the parent and consolidated income statement
would have been RO 2,004 thousands (2013 - RO 1,618 thousands) and RO 2,134 thousands (2013 -RO 1,677 thousands) respectively.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign
exchange rates. The Group operates in international markets and is exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the US dollar, Euros, Pound sterling and all GCC currencies.
The majority of the Group’s financial assets and financial liabilities are either denominated in local currency (Rials Omani) or currency fixed
against Rials Omani. Term loan is due in US Dollars. As the Omani Rial is pegged to the US Dollar, balances in US Dollars are not
considered to represent significant currency risk, hence the management believes that there would not be a material impact on the
profitability if these foreign currencies weakens or strengthens against the Omani Rials with all other variables held constant.
However, the management has set up a policy to require the Company to manage its foreign exchange risk against their functional currency.
The Company is required to hedge its foreign exchange risk exposure as needed. To manage its foreign exchange risk arising from future
commercial transactions and recognised assets and liabilities, the Company uses forward contracts. These contracts are not however
designated as hedges under IAS 39 and are consequently initially recognised at cost and subsequently re-measured to their fair value at
each reporting date. Material changes in the fair value of foreign currency forward contracts are recorded in the statement of comprehensive
income account as they arise. At 31 December 2014, with all the other variables held constant, management believes that there would be no
significant impact on the post tax profits due to fluctuations in these currencies.
Commodity price risk
The Group is affected by the volatility of certain commodities. Due to the significantly increased volatility of the price of the underlying, the
Group’s Board of Directors has developed and enacted a risk management strategy regarding commodity price risk and its mitigation.
Equity price risk
The Group do not hold any quoted investment.
Credit risk
Credit risk primarily arises from credit exposures to customers, including outstanding receivables and committed transactions. The Group
has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers
requiring credit over a certain amount. The Group seeks to limit its credit risk with respect to banks by only dealing with reputable banks and
with respect to customers by setting credit limits for individual customers and monitoring outstanding receivables.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
36. Financial instruments and related risk management (continued)
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and benefit other stake
holders. The management’s policy is to maintain a strong capital base so as to maintain creditor and market confidence and to sustain
future development of the business.
There has been no change in the group’s objectives, policies or process during the year ended 31 December 2014 and 31 December 2013.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting
date was:
Parent Company
2014
2013
Contract and trade receivables
Retention receivables
Advances, prepayments and other receivables
Deposits with banks
Cash and bank balances
251,430
60,105
22,094
1,293
735
335,657
226,790
60,507
19,848
11,551
4,169
322,865
Consolidated
2014
2013
265,341
60,268
21,532
1,324
2,568
351,033
231,321
61,029
20,807
11,591
6,092
330,840
The exposure to credit risk for contract billed receivables, trade receivables and work in progress at the reporting date by type of customer
was:
Government customers
Petroleum Development Oman
Other private customers
179,504
51,178
20,748
251,430
163,028
48,534
15,228
226,790
180,273
51,178
33,890
265,341
164,168
48,534
18,619
231,321
The group has established credit policies and procedures that are considered appropriate for the parent company and its subsidiaries. The
Company’s business is conducted mainly by participating in tenders / bids. On acceptance of a tender / bid it enters into a detailed contract
with the customer. This contract specifies the payment and performance terms as well as the credit terms. Also refer to note 38 key
sources of estimation of uncertainty for the impairment of the trade receivables.
The age of trade receivables at the reporting date was:
Not past due
Past due 0- 180 days
Past due 181 - 365 days
More than 365 days
129,844
33,311
25,048
63,227
251,430
-
101,488
57,706
12,731
54,865
226,790
-
141,247
34,702
25,771
63,621
265,341
(43)
103,695
59,269
13,306
55,051
231,321
39
The credit quality of the cash at bank and deposits with bank are as follows:
Rating
P-1
1,420
P-2
226
P-3
Not rated
178
1,824
5,851
1,658
7,940
15,449
2,188
1,119
184
178
3,669
6,947
1,733
740
7,963
17,383
Impairment
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
36. Financial instruments and related risk management (continued)
Liquidity risk
The following are the financial liabilities including interest payments:
Parent Company
2014
2013
Term loans
Short term loans
Bank borrowings
Trade and other payables
The contractual maturities of above financial liabilities were:
Term Loans:
Upto 90 days
91 - 180 days
181 - 365 days
More than 365 days
Short term loans:
Upto 90 days
91 - 180 days
181 - 365 days
Bank Borrowings:
Upto 90 days
91 - 180 days
Trade and other payables:
Upto 90 days
91 - 180 days
181 - 365 days
More than 365 days
Consolidated
2014
2013
100,582
28,000
62,691
161,439
352,712
76,775
35,400
87,713
167,380
367,268
106,570
33,027
63,503
186,200
389,300
77,830
35,400
90,248
166,557
370,035
6,170
8,972
17,238
68,202
100,582
5,512
5,425
19,688
46,150
76,775
7,209
10,012
15,761
73,588
106,570
5,676
5,571
19,869
46,714
77,830
23,000
5,000
28,000
22,900
12,500
35,400
23,000
5,000
5,027
33,027
22,900
12,500
35,400
51,049
11,642
62,691
62,711
25,002
87,713
51,861
11,642
63,503
65,246
25,002
90,248
98,550
18,403
17,274
27,212
161,439
123,604
21,455
1,952
20,369
167,380
115,698
21,774
19,731
28,997
186,200
111,485
23,076
11,479
20,517
166,557
Interest rate risk
The Group’s exposure to interest rate risk relates to its bank deposits, borrowings, and term loans.
Term loans of RO 104,068 (2013: RO 75,329) thousands are recognized at fixed interest rates and expose the Group to the fair value
interest rate risk. The remaining term loans of RO 2,502 (2013: RO 2,502) thousands are recognized at floating rates thus exposing the
Group to cash flow interest rate risk.
The company’s short term bank deposits carry fixed rates of interest and therefore are not exposed to interest rate risk.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
37. Fair values of financial instruments
Fair values
Financial instruments comprise financial asset, financial liabilities and derivatives.
Financial assets consist of bank balances, receivables and available for sale investments. Financial liabilities consist of term loans,
government soft loan and payables. Derivatives relates to forward currency and commodity hedging contracts.
Group’s financial instruments that are carried in the financial statements are having same fair value as set out below:
Financial assets
Parent Company
2014
2013
Contract and trade receivables
Retention receivables
Due from related parties
Other receivables (excluding prepaid expenses, advances
and due from related parties)
Investment in associates and subsidiaries
Investment available for sale
Cash and bank balances and deposits
Financial liabilities
Trade payables
Due to related parties
Other payables and provisions (excluding advances and
due to related parties)
Bank borrowings
Term loans
Consolidated
2014
2013
251,430
60,105
11,024
1,163
226,790
60,507
9,414
998
265,341
60,268
7,570
2,789
231,321
61,029
7,827
2,817
13,202
125
2,028
339,077
10,646
125
15,720
324,200
4,861
145
3,892
344,866
6,444
145
17,683
327,266
77,507
1,980
21,964
91,678
1,830
25,050
87,044
2,422
31,939
96,171
2,218
28,620
62,691
128,582
292,724
87,713
112,175
318,446
63,503
139,597
324,505
90,248
113,230
330,487
38. Key sources of estimation uncertainty
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below :
(a) Revenue recognition
The company uses the percentage-of-completion method in recognising its project revenues. Use of this method requires the company to
estimate revenues and costs over the remaining period of the projects. However, the deviations are not anticipated to be of a material nature
as the estimates are based on historical experience, progress to date on contracts and other factors, including expectations of future events
that are believed to be reasonable under the circumstances, and are regularly evaluated.
(b) Claims
The group has filed certain claims with its Government and Quasi Government customers and made an assessment of recoverable amounts
based on ongoing negotiations at the reporting date. In accordance with the group's accounting policy on revenue recognition, a portion of
such claims has been recognised in these consolidated financial statements based on these assessments. Management believes that such
amounts are in the normal course of the business activity.
The claims raised by the company against the customers are mainly in relation to variations from the originally agreed contract scope,
changes in costs incurred due to effects of the royal decrees issued after the commencement of contracts, additional costs incurred due to
extension of the project completion time etc., which are under various stages of negotiations with customers at the reporting date. Board of
directors believe that the full disclosure of the total amount of claims involved can prejudice the position of the group in these claims which
are uncertified by the customers. The group has also incurred losses on certain contracts which are still being executed at 31 December
2014. The management has recognised future estimated losses on these contracts in accordancewith IAS 11- Construction Contracts at
the year end .
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
38. Key sources of estimation uncertainty (continued)
(b) Claims (continued)
Other estimates that involve uncertainties and judgments which have significant effect on the financial statements include whether any
liquidated damages will apply when there has been a delay in completion of contracts and it is unsure as to which party is at fault.
(c ) Impairment of accounts receivable
An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer probable. For
individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which
are past due, are assessed collectively and a provision applied according to the length of time past due.
At the reporting date, the contract receivables were RO 190,647 (2013: RO 172,871) thousands of the group, which are mostly receivable
from Government and Quasi Government entities, includes value of RO 117,226 (2013: RO 117,035) thousands certification in process,
which is in normal course of the business activity in the construction industry. The management believes that these amounts are recoverable
in full. In addition to this, groups’ trade receivables and provision for impaired debts were RO 5,951 (2013: RO 3,713) thousands and RO 43
(2013: RO 39) thousands respectively.(refer note 9).
(d) Impairment of inventories
Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net
realisable value through physical verification of inventories carried out annually. As majority of the inventories are at ongoing project sites
these are considered as usable in nature by management as these are closely monitored by the respective project teams. Dedicated project
teams also monitors surplus inventories on closed/completed jobs for assessing their usability to consider necessary provisions. Amounts
which are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to the
inventory type and the degree of ageing or obsolescence. Management believes that provision of RO 1,785 thousand (2013 : RO 451
thousand) is adequate.(refer note 7).
(e ) Useful lives of property, plant and equipment
The group's management determines the estimated useful lives of its property, plant and equipment for calculating depreciation. This
estimate is determined after considering the expected usage of the asset or physical wear and tear. Management reviews the residual value
and useful lives annually and future depreciation charge would be adjusted where the management believes the useful lives differ from
previous estimates.
(f) Impairment of intangible assets
The Group follows the guidance of IAS 36 to determine when an intangible asset recognised is impaired. This determination requires
significant judgement and in making this judgement, the management evaluates, among other factors, the carrying amount of the entity’s
intangible assets and the future free cash flows from the operations of these entities which are based on the project feasibility reports and
long-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and the
operational and financing cash flow.
The management tests annually whether these intangible assets of the group have suffered any impairment in accordance with IAS 36,
‘Impairment of Assets’ which require the use of the above estimates.(refer note 4)
(g) Impairment of equity investments
The group treats available-for-sale equity investments as impaired when there has been a significant or prolonged decline in the fair value
below its cost or where other objective evidence of impairment exists. The determination of what is ‘significant’ or ‘prolonged’ requires
judgment, which is critically evaluated by the Group on a case to case basis.
Galfar Engineering & Contracting SAOG & Subsidiaries
Notes to Consolidated Financial Statements
As at 31st December, 2014
Amount in RO '000s
38. Key sources of estimation uncertainty (continued)
(h) Impairment of investments in associates
The parent company test annually whether investment in associates have suffered any impairment in accordance with IAS 36, ‘Impairment
of Assets’ which require the use of estimates. The parent company considers impairment of investments in associate companies when there
has been a significant decline in the carrying value below its cost or where other objective evidence of impairment exists. At 31 December
2014, management has made a specific assessment with respect to loss making associates (GEC, Kuwait and MTPL, India) based on the
future cash flows and profits of these associates and believes that the future profits would be sufficient to recover the accumulated losses
existing at the reporting date. Accordingly no impairment was considered necessary in these financial statements (refer note 6).
(i) Taxes
Uncertainties exist with respect to the interpretation of tax regulations and the amount and timing of future taxable income. Given the wide
range of business relationships and nature of existing contractual agreements, differences arising between the actual results and the
assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already
recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of finalisation of tax assessments
of respective Group companies. The amount of such provisions is based on various factors, such as experience of previous tax
assessments and differing interpretations of tax regulations by the taxable entity and the responsible tax authority.(refer note 24)
39. Comparative amounts
Certain of the corresponding figures of previous year have been reclassified in order to conform with the presentation for the current year.
Such reclassifications do not affect previously reported profit or shareholder’s equity.