annual report 2018 - gulf navigation

www.gulfnav.comwww.gulfnav.com

Head Office

39th Floor, API Trio Towers, Al Barsha 1, Dubai, U.A.E.

Tel: +971 4 4270104

Fax: +971 4 4270102

P.O. Box: 49651

[email protected]

Fujairah

Tel: +971 9 222 8991

Fax: +971 9 222 8992

P.O. Box: 3829

[email protected]

[email protected]

Khorfakan

Tel: +971 9 238 5713

Fax: +971 9 238 3032

P.O. Box: 10316

[email protected]

[email protected]

Saudi Arabia

Tel: +966 1 472 1066

Fax: +966 1472 1060

P.O. Box: 27497, Riyadh,

Saudi Arabia

[email protected]

Annual Report

2018

Content

A Broad Vision to a New Horizon

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Content

About Us

Our Slogan

Vision

Mission

Values

Winning Culture

Business Overview

Main Differentiators

Our Fleet

Our Business Segments

Our Subsidiaries

Gulf Ship Management LLC

Gulf Navigation Polimar Maritime LLC

Gulf Navigation Maritime and Operations Management LLC

Gulf Chemical Carriers LLC

Gulf Crude Carriers LLC

Statement by the Chairman of the Board

CEO speech

Board of Directors

Management Team

Financial Statements

Directors’ report

Independent auditor’s report

Consolidatedstatementoffinancialposition

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidatedstatementofcashflows

Notestotheconsolidatedfinancialstatements

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Gulf Navigation Holding PJSC (GNH) is a

fully integrated and synergized organization

with a multifunctional business. It is the

only maritime and shipping company

listed in the Dubai Financial Market

since February 2007 under the symbol

“GULFNAV”.Thecompanyisheadquartered

inDubai,withbranchesinsidetheFujairah

port, Khorfakkan, and Abu Dhabi, and

with an overseas office in theKingdomof

Saudi Arabia. GNH owns and operates a

fleetofChemicalandOilTankers,Offshore

Vessels,Marine and Ship Repair Services.

As an ISO 9001:2015 certified company

accredited by Bureau Veritas, GHN is

committed to adhering to the requirements

of the international management code for

the safe operations of vessels, pollution

prevention and environmental control

includingcompliancewithalltheapplicable

international laws, regulations and

requirements. GNH constantly works to

upgrade its operations and provide high-

quality services to local and international

markets. This opens new opportunities

to improve GHN’s services to existing

customerswhileattractingnewcustomers.

ABOUT US

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Anuual Report 2018

OUR SLOGAN


“AbroadVisiontoanewhorizon”Atotal

integrated and synergized organization

with amulti-functional business.We are

operating in a continuously changing &

transforming business environment. To

continue thriving in business over the

nexttenyearsandbeyond,wemustlook

ahead, understand the trends and forces

thatwillshapeourbusinessinthefuture

and move swiftly to prepare for what

willcome.Weshouldgetreadytodayfor

tomorrow’s requirements, that’swhat “A

broadvisiontoanewhorizon”isallabout.

It creates a long-term destination for our

businessandprovidesuswitha“Horizon”

towintogetherwithourstakeholdersand

businesspartners.

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VISION

Tocontinuethrivingasabusinessleaderoverthenexttenyearsandbeyond,GNHcreatesa

long-termdestinationdiversifyingitsbusinesswitha“ABroadVisiontoANewHorizon”in

ordertocontinueachievingsuitability,qualityandgrowth.Thenewvisionisbasedonmain

pillarsasfollows.

Anintegratedanddiversified

portfolio of maritime and

offshore high quality services

Portfolio

Ahybridnetworkof

collaborativestakeholders

andbusinesspartners

Partners

Smartimplementationofdoingbusinesseffectivelyandefficiently

Productivity

Wisemanagementofresources

withthehighestreturnon

investmentforstakeholders

Profit

Inspired,Innovative

andCommittedtowards

the corporation’s success

People

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Anuual Report 2018

MISSION

Ourmissionfurtherstrengthensournewhorizonwhichstimulatesouractionsanddecisions.

Tosharpenour

knowledgefor

changinghorizon,

value creation and

transformation

Tobuildadditional

value to our

stakeholdersand

businesspartners

Tofocus,sustainand

growourbusiness

withcommitmentsto

the future

Tobetotallyproactive

& innovative to spire

moments of optimism and

happiness

The Holistic

Approach

Concepts

Improving Communication

Sharpening Readiness

Mai

nta

inin

g Fo

cus

Enh

ancin

g Kn

owledge

Maintaining

Focus

Sharpening

Readiness

Enhancing

Knowledge

Improving

Communication

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VALUES

Ourvaluesserveasacompassforouractionsanddescribehowwebehave

and serve our partners

Refocusing the business, doing things smarter, being cost conscious,

effective and increasing productivity and efficiency

Leadership:Thecourage&innovationtoshapeabetterfuture

Collaboration: Effectiveness in employing collective relationships for thebenefitof our company and partners

Accountability:Responsibilityforouractions

Integrity:Incorporatingthehighestvalues,workethicsandintegrity

Quality: Providing superlative quality services

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Anuual Report 2018

WINNING CULTURE

Act Like Owners

Work Smart Be the Brand

Focus on the Market

Ourwinningculturedefinesourcore

values for actions and behaviour

withourpartnersandclients.

Corporate

Governance

Operational

Excellence

Change&Risk

Management

Internal

Audit

CoreValuestoServeCore

Business

• Beingaccountableforouractionsandinactions

• Stewardsystemassetsandfocusonbuildingvalue

• Rewardingourpeoplefortakingrisksand

findingbettersolutiontosolveproblems

• Learnfromouroutcomes“Whathaveworked

andwhatdidn’t”

• Actwithurgency

• Remainresponsivetochange

• Have the courage to change course

whenneeded

• Workefficiently

• Inspirecreativity,passion,optimismandfun

• Focusontheneedsofourconsumers,

customers and distinguished partners

• Getoutintothemarkettolisten,

observeandlearn

• Focusontheexecutioninthedaily

marketplace

• Alwaysaspireforbetter

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BUSINESS OVERVIEW

GULFNAVIGATIONHOLDING PJSC (the “Company” or “GNH”) is a totally integrated andsynergizedorganizationwithmultifunctionalbusiness.

Embracing new horizons and milestones with new ventures, continuous improvements/developmentsandglobal strategicpartnerships todevelop themaritimesector in the region,diversify the sources of the income, switch to aMulti-EnterpriseBusinessEstablishment andbecometheindustryleaderinthesesectors.

Providingourregionalandinternationalclientsthemostproductive,cost-effectiveandpremiumservices.

Committed to increase assets, create shareholder values and maximize the returns to ourstakeholders.

Weprideourselvesonbeingtheonlypubliclylistedmarine/maritimecompanyintheUAEwithaglobalreach.

Owns,operates,managesfleetof chemical tankers,offshore supportvessels and crewboats.Weprovide integratedmarine services and specialized in the transportationof crudeoil andchemicalproductsresponsiblyandsafelyinasustainablemanner.

OperatesinaccordancewiththebestindustrystandardsofQuality,Health,Safety,SecurityandEnvironmentandotherapplicablestatutorylaws,rulesandregulations.

Started operations since 2003 headquartered in Dubai with own branch offices/warehousesinsidetheportofFujairahandKhorfakkanandoverseasofficeintheKingdomofSaudiArabia.

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Anuual Report 2018

MAIN DIFFERENTIATORS

GNH is uniquely positioned to create a differentiated positionby being a National Shipping Company in theUAE that has highstandard,reliable,efficientandcompetitivefleet.

Ourkeydifferentiatoristhatwedeliverservicesinacosteffectiveandefficientmanner

andensurequalitycommitmentinallaspectsofbusiness.

Wehaveanagileandacumenbusinessthatmaximizesthereturnstoourstakeholders.

Wehaveadeepandrichcompetenceandwillcontinuouslyinvestinthedevelopment

ofour competence inorder to supportour customers and tobe a solution-oriented

company.

Weshallcreateacustomercentricorganizationdeliveringwithexcellenceandfocusing

onsecurity,quality,safetyandenvironment.

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• Name:GulfHuwaylat

• Type:IMOTypeIIChemicalTanker

• Ownership:Owned

• Age:10Years

• Name:GulfFanatir


• Ownership:Owned

• Age:10Years

• Name:GulfJalmuda


• Ownership:Owned

• Age:9Years

• Name:GulfDeffi


• Ownership:Owned

• Age:9Years

• Name:GulfMirdif


• Ownership:Owned

• Age:8Years

• Name:GulfMishref


• Ownership:Owned

• Age:8Years

OUR FLEET

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Anuual Report 2018

• Name:GulfMishref


• Ownership:Owned

• Age:8Years

• Name:GulfNav3

• Type:CrewBoat

• Ownership:Owned

• Age:12Years

• Name:GulfNav4

• Type:CrewBoat

• Ownership:Owned

• Age:12Years

• Name:Aldelta

• Type:LivestockCarrier

• Ownership:Owned

• Name:AlMawashi


• Ownership:Owned

• Name:Rahmeh


• Ownership:Owned

• Name:GulfNav2

• Type:CrewBoat

• Ownership:Owned

• Age:12Years

• Name:GulfNav1

• Type:CrewBoat

• Ownership:Owned

• Age:12Years

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OUR BUSINESS SEGMENTS

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Anuual Report 2018

OUR SUBSIDIARIES

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Established in2009,Gulf ShipManagement (GSM) is awholly owned subsidiary ofGulfNavigationHoldingPJSC

providingacompleterangeofintegratedshipmanagement/technicalservicesforthevesselsownedbyGulfNavigation

andthirdpartyvessels.GSMisanISO9001:2008andISO14001:2004certifiedshipmanagementcompanydelivering

technicalmanagementservicesforOilTankersandChemicalTankers(IMOTypeII/III).Thecompanyhasadedicated

teamofprofessionalshavingbroadtechnicalandpracticalexperienceinthemarineindustryandtheyhaveexcelled

in their previous individual careers. GSM is committed to maintain professional ethics and transparency in all its

operationswhichistheHallMarkofthecompany.GSMaimstoberecognizedasoneofthetopprofessionalandethical

shipmanagementcompaniesprovidingtheircustomerswithsafe,professional,cost-effectiveandqualityservices.

Deliver Safely

Transparency

Cost Optimization

Asset Value Protection

Tailored Approach

Protecting the Environment

OneStopShop: benchmarkcrewing,safetyandtechnicalstandards

FirstClassService: all ships managed to the highest standards

EnvironmentalProtectionAndSupport:lookingaftertheenvironment,

personallyandasbusinessentity

Leadership: transparencyinouroperations,andfirst-classshipmanagement

OperationExpenditureOptimisation

AssetValueProtection

Safety:safestshipoperationswithnilinjuries,damagetoassetandzeropollution

TailoredApproach:our comprehensive range of ship management services to meet and

exceedeachvesselownersneedandexpectations;andtosatisfyallshipownersneeds

globally

Main Services

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Anuual Report 2018

Establishedin2017,GulfNavigationPolimarMaritimeLLChasbecomeasubsidiaryofGulfNavigationHoldingPJSC

asresultofthepartnershipbetweenGulfNavigationHoldingandPolimarTurkishHoldingtogrowitsfleetandincrease

itsglobalreach.ThecompanyisheadquarteredinDubaiwithofficesinDubai,Khorfakan,Fujairah.Thecompanyisa

one-stopshopservingallterminalsandcommercialportsintheUAEandhandlingalltypesofvesselsandcargos.Gulf

NavigationPolimarMaritimeprovidescost-effectiveandpremiumservices inall theGCCcountries through itsown

liaisonoffices.Thecompanyhasawellexperiencedstaffwithexcellentknowledgeofthelocalandregionalmarkets

andtheirrelevantlaws,rulesandregulations.GulfNavigationPolimarMaritimeiscommittedtolongtermbusiness

relationships,accountability,transparencyanddependabilityforallitsmarinesolutions.

Main Services

Agency Services

* Coordination and Supply Services

* CargoVesselHandling

* CrewBoats

Marine Products,

Steel Wires Sales

and Distribution

Ship Repair

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Gulf Navigation Maritime and Operations Management was established in 2016 by Gulf Navigation Holding to

implementthegroup’sdevelopmentandexpansionplansaccordingtothegroup’snewstrategythataimsatpositioning

Gulf Navigation amongst the premier world leading companies in the maritime sector. This will be achieved by

providingproactive integrated solutions that serves themarketneeds according to thehighest international safety

standardswhileensuringprofessionalismandefficiencyindeliveringthetasks.

Moreover,GulfNavigationandMarineOperationsManagementLLChandlestheoperationsofthegroup’ssubsidiaries

suchasGulfShipManagementLLCandGulfNavigationPolimarMaritimeLLCinordertoensureprovidinginternational

high-qualityservices.

ShippingofOilandPetroleumProducts

Ship Charter

ShippingLinesofFreightandPassengersTransportation

CargoPacking

ShipOperationsandManagement

ShippingLinesAgency

Cargo Loading and Unloading Services

Main Services

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Anuual Report 2018

ShippinglinesofFreightandPassengersTransportation Ship Charter

GulfChemicalCarriersLLCisasubsidiaryofGulfNavigationHoldingPJSCthatwasestablishedin2006toexpand

therangeofservicesprovidedbythegroupandtodiversifyitsactivitiesinordertomeetalltherequirementsofthe

distinctivemaritimesectors.

Main Services

GulfCrudeCarriersLLCwasestablishedin2006asasubsidiaryofGulfNavigationHoldingPJSCtoprovidespecialized

servicestotransportoilandgasanditsderivativesinadditiontoprovideoffshoresupportservicesinordertomeetthe

potentialincreasingdemandforenergyproducts.

ShipOperationsandManagement

ShippingLinesAgency

Cargo Loading and Unloading Services

ShipOperationsandManagement Ship Charter

Main Services

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Dear Shareholders,Greetings,

OnbehalfoftheBoardofDirectors,Iampleasedtopresenttoyoutheannualreport,whichincludesthecompany’sactivitiesandresultsaswellastheprogrammesandprojectsthathavebeenimplementedtocopewiththerapidchangesthatrequirethecompanytocontinuetodevelopandexpandtomeetthemarket’sgrowingdemands.Thereportalsoshowstheconsolidatedfinancialstatementthathighlightthecompany’sfinancialstatusforthefiscalyearthatended31December2018.

Our strategy is alignedwith thevisionofourwise leadership to establish anationalmaritime industrial cluster thatwill position theUAEasoneof thekeyspecialisedmaritimehubsworldwide,andprovidearemarkablesuccess storydemonstrating that themaritimesectorprovidesalotofprofitableopportunitiesforthosewhocanseizethem.Wehaveenteredintoseveralregionalandglobalstrategicpartnerships,whichgivesusvariedopportunitiesandtheabilitytogrowandprovideourservicesnotonlyinthefieldofshipowningandmanagement,butalsoinseveralotherareas.Theseincludemaritimeservices,shippingagency,shipmaintenanceandbuilding,maritimetechnicalconsultancyandmaritimeprojectmanagement.Thiswillcontributetorealisingthecompany’svisiontodiversifyitsportfolio,expand its assets, provide added value to shareholders and introduce integrated quality maritime services according to the highestinternationalstandardsinsecurity,safetyandenvironmentalprotection.

Tosupportitsvisiontobecomeoneofthebiggestpetrochemicalshippingcompaniesintheregion,thecompanyhasexpandeditsfleetbyaddingfourlivestockcarriers.Thecompanyhasalsoinvestedindevelopingandupgradingallitsfleettofullycomplywithinternationalstandards related to reducing greenhouse gas emissions, climate change and the targets for2020,2025 and2030.These include therequirementsforballastwatertreatment,sulphurdioxideemissionsandfuelconsumption.

Althoughthefinancialstatementshowslossesin2018,thesewereinfactnecessarystepsformakingprofitsinthefuture,andwillopenthedoorfortheGrouptoexpandinthenextfewyears.TheGroupincurredlossesofAED40millioninthefiscalyearthatended31December2018,comparedtoanetprofitofAED40.7millionin2017.Oneofthemainreasonsbehindtheseresultswasthefinalsettlementofthecompany’slastlegaldisputewithaChinesecompanythatwasduesincethetimeofthepreviousadministration.GulfNavigationsettledthecasebypaying$8millionagainsttheamountof$19millionthatwasdue.Thecompanyalsoenteredthreepetrochemicaltankersintothedrydockforthemandatoryfive-yearmaintenancethatincludedmajorupgradesthatwouldenhancethecompany’scompetitivenessintheglobalmarkets.Thiswasalsoneededfortheimmediateandfuturetransformationtoreducetheenvironmentalfootprintofthecompany’sfleetandtrans-seaoperations.Theupgradealsoincludedequippingthethreevesselswithstate-of-the-arttechnologiesthatwillreduceoperationalexpenses.Asaresultoftheseexpensesandthelossesofthethreeships’rentalrevenuesduringthemaintenanceperiod,thecompany’sfinancialresultsshowtheselossesin2018.

Inconclusion,IwouldliketothanktheGroup’steamofinternationally-renownedandrecognisedmaritimeprofessionals.Ialsothankourinvestorsandpartnersfortheirconfidenceinus.WepromisetocontinuetostrengthentheGroup’spositionasoneofthekeyplayersinthenationalmaritimeeconomyandachievetheUAE’smaritimestrategytobeoneoftheworld’sprominentmaritimecentres.

Thank You!

STATEMENT BY THE CHAIRMAN OF THE BOARD

Abdulla Saeed Abdulla Brook Alhemeiri

ChairmanoftheBoard

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Anuual Report 2018

Dear Shareholders,Greetings,

CompetitivepressuresaredailychallengesfortheGroup.However,ourlong-termstrategyensuresenoughflexibilitytoadapttomarketchangesandpursuetheproperinvestmentopportunitiestoprovidethebestservicesandsolutionstoourcustomers.Thishascreatedtherightenvironmenttodevelopourbusinessandtakeadvantageofopportunitiesassociatedwiththechallengesweface,andcontinuetoenhanceourservicestomeetourcustomers’expectations.

TheGroup’sfinancialstatementshowslossesofAED40millionin2018.However,acarefulanalysisrevealsinvestmentstepsforthefuturethatwillaccelerategrowthanddevelopmentinthenextfewyears.TheGrouphasapprovedplansandprogrammestoimmediatelytransformourfleettofullycomplywithinternationalenvironmentallawsrelatedtoreducinggreenhousegasemissions,climatechangeandthetargetsfor2020,2025and2030.Threepetrochemicaltankersenteredthedrydocks,wheretheywereupgradedinordertoreducethecarbonfootprintoftheGroup’sfleetandtrans-seaoperations.Wehaveinstalledgasexhaustpumpstoreducesulphuremissions,andaddedadvancedballast-watertreatmentequipmenttopreventbiologicalpollutionsothatourvesselscomplywithIMO’sstandards.ThisensurespriorityingettingnewcontractsinestablishedmarketssuchastheEuropeanUnionandNorthAmerica.Manycompaniesareexpectedtowithdrawfromthesemarketsastheycannotaffordtheexpensesassociatedwithcomplyingwiththenewspecifications.

Wehavealsoinstallednewadvancedpropellersthatreducefuelconsumptionby5%.ReducingfuelconsumptioninGulfNavigation’svesselsaddsacompetitiveadvantagethatallowsittomakemoreprofitsandofferlowerpricesthanitscompetitorswhowillhavetopayhigherlow-sulphurfuelbills.Moreimportantly,GulfNavigationwillbereadytocomplywithgreen-housereductionstandardsandcontributetoachievingtheUAE’sgoalsinthisregard.Wehavedecidedtotakethisstepsoonerthanlatertoavoidhavingtousemoreexpensiveandless-availablelow-sulphurfuel,riskinghigheroperationalcostsandthepossibilityofourvesselshavingtostopandnotgeneraterevenueswhilewaitingforthenewfuel.

GulfNavigation’stechnicalteamadoptedthesemajorupgradesandchangesforthecompany’sfleetafterdeeplyanalysingtheglobalpetrochemicalsandpetroleumshippingindustry,inlightofthenewrequirementsandstandardsimposedbyIMO,theEuropeanUnion,andtheUnitedStates.Thenewmeasureswillforcemanycompaniesoutofthemarketbecauseoftheirinabilitytocomplywiththem,inadditiontotheexpectedcrisisthatwillresultfromlow-sulphurfuelproduction,whichwillalsobemoreexpensive.

Ontheotherhand,andinlinewiththeGroup’sstrategythatisbasedonthegradualexpansionofitsservicesandfleetsizetomeettherequirementsofexpectedcontractsandexpansionprojects,andafterstudyingthecompany’sfutureplanswhichprimarilyaimtodiversifysourcesofincomeandriskmanagement,reducecostsandincreaseoperationalefficiency,whilemaintainingthehighestinternationalstandards,theBoardofDirectorsofGulfNavigationHoldingGroup(PJSC)approvedincreasingthecompany’scapitaltoAED1,019,209,250dividedinto1,019,209,250shares.

Iwouldliketoemphasizethatthepurposeofincreasingthecapitalisthecompany’sdesiretocontinuetodevelopanddiversifyitssourcesofincomebypurchasingfourlivestockcarriers,whichwillreducefutureinvestmentrisks.Purchasingtheselivestockcarriersalsoopensupnewhorizonsandmarketsforthecompany,whichenablesittoincreaseitsmarketshare,especiallythatthelivestocktransportanddistributionsectorintheMiddleEastisdominatedbyalimitednumberofspecialisedcompaniesandthereislesscompetition.

As2019progresses,globaleconomyperformanceisstilluncertain.However,weareconfidentthatwecanefficientlycontinuetoimplementourstrategyandharnesstechnologyinawaythatismostbeneficialtoouroperations,ourshareholdersandallstakeholders.Werealizethatprovidingaworkenvironment thatpromotesdiversityandencouragesopendialogue isakeypillar inachievingourbusinessobjectives. Itprovidesuswithastrongbasetoestablishourpositioninkeepingpacewithglobaldevelopmentsandfindoptimalwaystoimprovethequalityofourservicesprovidedtoourclientstokeepupwiththeconstantmarketdynamics.

Itakethisopportunitytoencourageallmycolleaguestoharnessalldifficultiestomakebigpositivechangesforthecompany.Hardworkisoursourceofpowerandhelpsusachievehigherlevelsofsustainability.Thisinturn,willleadtoamoresuccessfulandsustainablebusiness.Ihavealwaysemphasisedthatoursuccessisbasedonastrongteamthatpossessesthehighestinternationalcapabilities.

Toconclude,Iwouldliketothankallmycolleagueswhocontributetoensuringthatthecompanycantakeanewstepeveryday.IalsothanktheBoardofDirectorsfordevelopingsuchanexcellentstrategicplan,fortheirconfidenceinus,andforprovingtheresourcesthathaveallowedustocompetewiththelargestcompaniesworldwide.Wepromiseourinvestorsandpartnerstocontinuetoachievegreaterexcellenceinperformanceandgrowth,toestablishthecompany’spositionasoneofthekeyplayersinthenationalmaritimeeconomyandachievetheUAE’sstrategytobeakeyglobalmaritimehub.

Thank You!

STATEMENT BY PRESIDENT

Omar Abu Omar

PresidentMaritime&OperationsManagment

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ABDULLA SAEED ABDULLA BROOK ALHEMEIRI

ChairmanoftheBoard

ANAS SOBHI AHMED ATATREH

Vicechairman/ChairmanoftheNomination&RemunerationCommittee

AHMAD M. F. A. AL KILANI

BoardMember-MemberAuditCommittee/MemberNomination&RemunerationCommittee

MUSTAFA GHAZI KHERIBA

BoardMember

AJIT VIJAY JOSHI

BoardMember

ABDUL RAHMAN MAHMOUD ABDUL RAHMAN MOHAMAD AL AFIFI

BoardMember

MAGID ATTALLA AL-SHAMROKH

BoardMember-MemberAuditCommittee

BOARD OF DIRECTORS

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Anuual Report 2018

OMAR ABU OMAR

PresidentMaritime&OperationsManagment

NASHAT HELAL

ChiefFinancialOfficer

AHMAD SARAIREH

General Counsel

MANAGEMENT TEAM

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Gulf Navigation Holding PJSC

and its Subsidiaries

DIRECTORS’REPORTANDCONSOLIDATEDFINANCIALSTATEMENTS

FORTHEYEARENDED

31DECEMBER2018

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Anuual Report 2018

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DIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2018

TheDirectorssubmit theirreportandconsolidatedfinancialstatementsofGulfNavigationHoldingPJSC(“theCompany”)andits

subsidiaries(collectivelyreferredtoas“theGroup”)fortheyearended31December2018.Thesewillbelaidbeforetheshareholders

attheAnnualGeneralMeetingoftheCompany,whichisscheduledtobeheldsometimewithinthefirsthalfof2019.

Principal activities

TheGroup isprimarilyengaged inmarine transportationofcommodities,charteringvessels, shippingservices,marine transport

underspecialpassengerandmerchantcontracts,clearingandforwardingservicesandcontainerloading,unloading,dischargingand

packagingservices.

Results and appropriation of profit

TheresultsoftheGroupfortheyearended31December2018aresetoutonpage33oftheseconsolidatedfinancialstatements.

Going concern

Asofthedateofauthorisationoftheseconsolidatedfinancialstatements,theGrouphasdemonstrateditsabilitytoimproveitsfinancial

positionbyraisingasignificantamountofnewequityandbyreachingagreementforfullandfinalsettlementwithremainingcounter-

parties.Inaddition,theGroupisintheprocessofrefinancingoneofitsloanfacilitieswithnewlenders.TheDirectors,afterreviewing

theGroup’savailablesourcesoffunding(eitherthroughbankloanoradditionalequityincludingissuanceofsukukorotheralternative

models); cashflow forecasts and strategicplans for aperiodofnot less than twelve (12)months from thedateof the signingof

theseconsolidatedfinancial statements,havea reasonableexpectation that theGroupwillhaveadequateresources tocontinue in

operationalexistencefortheforeseeablefuture.TheGroupthereforecontinuestoadoptthegoingconcernbasisinpreparingthese

consolidatedfinancialstatements.

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Anuual Report 2018

DIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2018 (continued)

Directors

Thedirectorsofthecompanyduringtheyearwereasfollows:

Mr.AbdullaSaeedAbdullaBrookAlhemeiri(Chairman)

Mr.AnasSobhiAhmedAtatreh(ViceChairman)

Mr.AhmadMohamedFathiKilani(Director)

Mr.MagidAttallaAl-Shamrokh(Director)

Mr.AjitVijayJoshi(Director) -AppointmentDate13/01/2019

Mr.MustafaGhaziKheriba(Director) -AppointmentDate1/01/2019

Mr.MohammadZiadTariqRaslanAlhawari(Director)-ResignationDate07/01/2019

Mr.KhamisJumaKhamisBuamin (Director)-ResignationDate 01/01/2019

Auditors

TheconsolidatedfinancialstatementsoftheGrouphavebeenauditedbyErnst&Young.

Signed by:

Anas Sobhi Ahmed Atatreh

Vice Chairman

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INDEPENDENTAUDITOR’SREPORTTOTHESHAREHOLDERSOF

GULFNAVIGATIONHOLDINGPJSC

Reportontheauditoftheconsolidatedfinancialstatements

Opinion

WehaveauditedtheconsolidatedfinancialstatementsofGulfNavigationHoldingPJSC(the “ParentCompany”)anditssubsidiaries

(collectivelyreferredtoasthe“Group”),whichcomprisetheconsolidatedstatementoffinancialpositionasat31December2018,

andtheconsolidatedstatementofcomprehensiveincome,consolidatedstatementofchangesinequityandconsolidatedstatementof

cashflowsfortheyearthenended,andnotestotheconsolidatedfinancialstatements,includingasummaryofsignificantaccounting

policies.

Inouropinion,theaccompanyingconsolidatedfinancialstatementspresentfairly,inallmaterialrespectstheconsolidatedfinancial

positionoftheGroupasat31December2018,anditsconsolidatedfinancialperformanceanditsconsolidatedcashflowsfortheyear

thenendedinaccordancewithInternationalFinancialReportingStandards(“IFRSs”).

Basis for opinion

WeconductedourauditinaccordancewithInternationalStandardsonAuditing(“ISAs”).Ourresponsibilitiesunderthosestandards

are further described in theAuditor’s responsibilities for the audit of the consolidatedfinancial statements sectionof our report.

WeareindependentoftheGroupinaccordancewiththeInternationalEthicsStandardsBoardforAccountants’CodeofEthicsfor

ProfessionalAccountants(the“IESBACode”)togetherwiththeethicalandindependencerequirementsthatarerelevanttoourauditof

theconsolidatedfinancialstatementsintheUnitedArabEmirates,andwehavefulfilledourotherethicalresponsibilitiesinaccordance

withtheserequirementsandtheIESBACode.Webelievethattheauditevidencewehaveobtainedissufficientandappropriateto

provideabasisforouropinion.

Key audit matters

Keyauditmattersare thosematters that, inourprofessional judgment,wereofmostsignificance inourauditof theconsolidated

financial statements of the currentperiod.Thesematterswere addressed in the context of our audit of the consolidatedfinancial

statementsasawhole,andinformingouropinionthereon,andwedonotprovideaseparateopiniononthesematters.Foreachmatter

below,ourdescriptionofhowourauditaddressedthematterisprovidedinthatcontext.

WehavefulfilledtheresponsibilitiesdescribedintheAuditor’sresponsibilitiesfortheauditoftheconsolidatedfinancialstatements

sectionofourreport,includinginrelationtothesematters.Accordingly,ourauditincludedtheperformanceofproceduresdesigned

torespondtoourassessmentoftherisksofmaterialmisstatementoftheconsolidatedfinancialstatements.Theresultsofouraudit

procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the

accompanyingconsolidatedfinancialstatements.

The monitoring of debt and liquidity position

CovenantscomplianceisakeyauditmatterastheGroup’screditfacilitiesaresubjecttoseveralcovenants.Notes16and2.1tothe

consolidatedfinancialstatementsdisclosesthestatusoftheGroup’scompliancewithdebtcovenantsandstepstakenbymanagement

withtheobjectiveofimprovingtheGroup’sdebtandliquidityposition.

29

Anuual Report 2018


GULFNAVIGATIONHOLDINGPJSC(continued)

Reportontheauditoftheconsolidatedfinancialstatements(continued)

Key audit matters (continued)

The monitoring of debt and liquidity position (continued)

Futurecompliancewithdebtcovenantsandmonitoringtheliquiditypositionareimportantaspectsforourauditsinceitcanhavea

majorimpactonthegoingconcernassumption,onthebasisofwhichtheconsolidatedfinancialstatementsareprepared.Substantiation

offuturecompliancewithsuchcovenantsandmonitoringtheliquiditypositionarebasedonexpectationsandestimatesaboutfuture

marketand/oreconomicconditions,etc.Theseexpectationsandestimatescanbeinfluencedbysubjectiveelementssuchasestimated

futurecashflows,forecastedresultsandmarginsfromoperationsandexpectationsregardingfuturedevelopmentsintheeconomyand

themarket.

Weinvolvedvaluationexpertsfortheevaluationoftheassumptionsandforecastsmadebymanagement.Weevaluatedtheexternal

inputsandassumptionswithinthegoingconcernmodelbybenchmarkingthemagainstmarketobservableexternaldata.Wealso

revieweddocumentationsubstantiatingthesourcesoffuturefundingavailabletotheGroup.Wechallengedthesensitivitiesandstress

testingthatmanagementperformedonthegoingconcernforecast.

Forthegoingconcernassumptionsandfinancingrequirements,seeNotes2.1totheconsolidatedfinancialstatements.

WealsoverifiedtheGroup’sdebtcovenantscalculationandcomplianceasof31December2018andevaluatedtheadequacyofthe

relateddisclosuresasrequiredbyIFRS.

Business combination

Asdisclosed innote7 to theconsolidatedfinancial statements, theGrouphascompletedanacquisitionduringtheyearended31

December2018.Theaccountingforsuchacquisitionscanbecomplex,includingtheidentificationandvaluationofassetsandliabilities

acquiredand,incertaincircumstances,thereisjudgementastowhethertheyshouldbeconsolidated.

Weconsideredtheacquisitionstobeakeyauditmatterasthisisasignificanttransactionduringtheyearwhichrequiressignificant

managementjudgementregardingtheallocationofthepurchasepricetotheassetsandliabilitiesacquiredandadjustmentsmadeto

alignaccountingpoliciesofthenewlyacquiredentitywiththoseoftheGroup.Thisexercisealsorequiresmanagementtodetermine

thefairvaluesoftheassetsandliabilitiesacquiredandtoidentifyintangibleassetsacquiredintheacquisition.

Thereisariskthattheacquisitionmaynotbecorrectlypresentedanddisclosedintheconsolidatedfinancialstatements.Also,the

businesscombinationmaynotbeaccountedforinaccordancewithIFRS3.

30





Business combination (continued)

Ourauditproceduresincluded,amongstothers:

– inspectionofthesignedsaleandpurchaseagreementinrelationtotheacquisitionstoobtainanunderstandingofthetransaction

andthekeyterms.

– verificationof the considerationpaidand reviewof the fairvaluationof theacquiredassets, including intangible assets and

liabilities,bycorroboratingthisinformationbasedonourdiscussionwithmanagementandunderstandingofthebusinessofthe

entity.

– assessmentofthereasonablenessofthevaluationassumptions,suchasdiscountandgrowthrates,bycomparingtheseassumptions

tosourcedataandmarketdata.

– evaluationoftheappropriatenessofaccountingandadequacyofthedisclosuresintheconsolidatedfinancialstatements.

Assessment of the carrying value of goodwill

Under IFRSs, theGroup is required to annually test the goodwill for impairment.This annual impairment testwas significant to

ourauditbecausethecarryingvalueofgoodwillofAED160,342thousandasof31December2018ismaterialtotheconsolidated

financialstatements.Inaddition,management’sassessmentprocessisjudgmentalandisbasedoncertainassumptions,specifically

grossmargins,growthrateanddiscountratethatareaffectedbyexpectedfuturemarketoreconomicconditions.

Goodwillismonitoredbythemanagementattheoperatingsegmentlevel.TheGrouphasidentifiedthevesselowningandchartering

division,marineproductssalesanddistributionandshippingservicesasitsoperatingsegments.Goodwillhasbeenallocatedtothe

vesselowningandchartersegment.

Weevaluatedthemanagement’sfuturecashflowforecastsandtheprocessbywhichtheyweredrawnup,andtestedtheintegrityofthe

underlyingdiscountedcashflowmodel.Wecomparedtheforecastsusedinthismodeltotheplanandassessedtheactualperformance

intheyearagainsttheprioryearbudgetstoevaluatehistoricalforecastingaccuracy.

Wealsoevaluatedthedirectors’assumptionsusedforthefuturecashflowgrowthintheplan,by:

• Comparingthefuturecashflowgrowthassumptionstoeconomicandindustryforecasts;

• Assessingthereasonablenessofthedirectors’forecastbyreviewingpreviousforecastsagainsthistoricalactualperformance;

and

• Performingasensitivityanalysisinrespectofthekeyassumptionstoascertaintheextentofchangeinthoseassumptions

which,eitherindividuallyorcollectively,wouldberequiredforthegoodwilltobeimpaired.Weassessedthelikelihoodof

thesechangesinassumptionsarising.

31

Anuual Report 2018





Assessment of the carrying value of goodwill (continued)

Forimpairmentassessmentwe:

• Involvedourinternalvaluationspecialiststotestthediscountrates,bycomparingkeyinputs,whererelevant,toexternally

deriveddataordataforcomparablelistedorganisation;and

• Consideredtheuseofthelong-termGDPgrowthrateforthecountryinwhichtheCGUoperatesforthegrowthrateused

beyondtheperiodcoveredbytheplan.

Furthermore,we evaluated the adequacy of theGroup’s disclosures concerning goodwill inNote 7 to the consolidated financial

statements.

Other information

OtherinformationconsistsoftheinformationincludedintheAnnualReport,otherthantheconsolidatedfinancialstatementsandour

auditor’sreportthereon.Managementisresponsiblefortheotherinformation.

Ouropinionontheconsolidatedfinancialstatementsdoesnotcovertheotherinformationandwedonotexpressanyformofassurance

conclusionthereon.

Inconnectionwithourauditoftheconsolidatedfinancialstatements,ourresponsibilityistoreadtheotherinformationand,indoing

so,considerwhethertheotherinformationismaterially inconsistentwiththeconsolidatedfinancialstatementsorourknowledge

obtainedintheauditorotherwiseappearstobemateriallymisstated.If,basedontheworkwehaveperformed,weconcludethat

thereisamaterialmisstatementofthisotherinformation,wearerequiredtoreportthatfact.Wehavenothingtoreportinthisregard.

Responsibilities of the management and the Board of Directors for the consolidated financial statements

Management isresponsibleforthepreparationandfairpresentationoftheseconsolidatedfinancialstatements inaccordancewith

IFRSsandincompliancewiththeapplicableprovisionsof theUAEFederalLawNo.(2)of2015,andforsuch internalcontrolas

management determines is necessary to enable the preparation of consolidated financial statements that are free frommaterial

misstatement,whetherduetofraudorerror.

Inpreparingtheconsolidatedfinancialstatements,managementisresponsibleforassessingtheGroup’sabilitytocontinueasagoing

concern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccountingunlessmanagement

eitherintendstoliquidatetheGrouportoceaseoperations,orhasnorealisticalternativebuttodoso.

TheBoardofDirectorsisresponsibleforoverseeingtheGroup’sfinancialreportingprocess.

32




Auditor’s responsibilities for the audit of the consolidated financial statements

Ourobjectiveistoobtainreasonableassuranceaboutwhethertheconsolidatedfinancialstatementsasawholearefreefrommaterial

misstatement,whetherduetofraudorerror,andtoissueanauditor’sreportthatincludesouropinion.Reasonableassuranceisahigh

levelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithISAswillalwaysdetectamaterialmisstatement

whenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycould

reasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthesefinancialstatements.

AspartofanauditinaccordancewithISAs,weexerciseprofessionaljudgmentandmaintainprofessionalscepticismthroughoutthe

audit.Wealso:

• Identifyandassesstherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherduetofraudorerror,

designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriate

toprovideabasisforouropinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthan

foroneresultingfromerror,as fraudmay involvecollusion,forgery, intentionalomissions,misrepresentations,or the

overrideofinternalcontrol.

• Obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriate

inthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheGroup’sinternalcontrol.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related

disclosuresmadebymanagement.

• Concludeontheappropriatenessofmanagement’suseofthegoingconcernbasisofaccountingand,basedontheaudit

evidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubton

theGroup’sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,wearerequiredtodraw

attentioninourauditor’sreporttotherelateddisclosuresintheconsolidatedfinancialstatementsor,ifsuchdisclosuresare

inadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtaineduptothedateofourauditor’s

report.However,futureeventsorconditionsmaycausetheGrouptoceasetocontinueasagoingconcern.

• Evaluatetheoverallpresentation,structureandcontentoftheconsolidatedfinancialstatements,includingthedisclosures,

andwhether the consolidated financial statements represent the underlying transactions and events in amanner that

achievesfairpresentation.

• Obtainsufficientappropriateauditevidenceregardingthefinancialinformationoftheentitiesorbusinessactivitieswithin

theGrouptoexpressanopinionontheconsolidatedfinancialstatements.Weareresponsibleforthedirection,supervision

andperformanceofthegroupaudit.Weremainsolelyresponsibleforourauditopinion.

33

Anuual Report 2018




Auditor’s responsibilities for the audit of the consolidated financial statements (continued)

WecommunicatewiththeBoardofDirectorsregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificant

auditfindings,includinganysignificantdeficienciesininternalcontrolthatweidentifyduringouraudit.

WealsoprovidetheBoardofDirectorsastatementthatwehavecompliedwithrelevantethicalrequirementsregardingindependence,

andtocommunicatewiththemallrelationshipsandothermattersthatmayreasonablybethoughttobearonourindependence,and

whereapplicable,relatedsafeguards.

FromthematterscommunicatedwiththeBoardofDirectors,wedeterminethosemattersthatwereofmostsignificanceintheaudit

oftheconsolidatedfinancialstatementsofthecurrentperiodandarethereforethekeyauditmatters.Wedescribethesemattersinour

auditor’sreportunlesslaworregulationprecludespublicdisclosureaboutthematterorwhen,inextremelyrarecircumstances,we

determinethatamattershouldnotbecommunicatedinourreportbecausetheadverseconsequencesofdoingsowouldreasonablybe

expectedtooutweighthepublicinterestbenefitsofsuchcommunication.

Report on other legal and regulatory requirements

Further,asrequiredbytheUAEFederalLawNo.(2)of2015,wereportthat:

i) theCompanyhasmaintainedproperbooksofaccount;

ii) wehaveobtainedalltheinformationweconsiderednecessaryforthepurposesofouraudit;

iii) theconsolidatedfinancialstatementshavebeenpreparedandcomply,inallmaterialrespects,withtheapplicableprovisionsof

theUAEFederalLawNo.(2)of2015,andthearticlesofassociationoftheCompany;

iv) thefinancialinformationincludedintheDirectors’reportisconsistentwiththebooksofaccountoftheCompany;

v) theCompanyhasnotmadeanyinvestmentsinsharesandstocksduringtheyearended31December2018;

vi) note19reflectsmaterialrelatedpartytransactionsandthetermsunderwhichtheywereconducted;

34



Reportonotherlegalandregulatoryrequirements(continued)

vii) basedontheinformationthathasbeenmadeavailabletous,nothinghascometoourattentionwhichcausesustobelievethat

theCompanyhascontravenedduringthefinancialyearended31December2018anyoftheapplicableprovisionsoftheUAE

FederalLawNo.(2)of2015orofitsarticlesofassociationwhichwouldmateriallyaffectitsactivitiesoritsfinancialpositionas

at31December2018;and

viii) note22reflectsthesocialcontributionsmadeduringtheyear.

ForErnst&Young

Signedby:

AnthonyO’Sullivan

Partner

RegistrationNo:687

19March2019

Dubai,UnitedArabEmirates

35

Anuual Report 2018Gulf Navigation Holding PJSC and its Subsidiaries

2018 2017 Notes AED’000 AED’000ASSETSNon-current assetsVessels,propertyandequipment 6 1,248,604 843,354Goodwill 7 160,342 135,999Investmentinajointventure 8 - 300 ───────── ───────── 1,408,946 979,653 ───────── ─────────Current assetsInventories 9 13,756 12,275Tradeandotherreceivables 10 63,548 42,217Duefromarelatedparty 19 1,017 3,371Cashandbankbalances 11 34,279 38,673 ───────── ───────── 112,600 96,536 ───────── ─────────TOTALASSETS 1,521,546 1,076,189 ═════════ ═════════EQUITYANDLIABILITIESEQUITYSharecapital 12 919,209 551,667Statutoryreserve 13 19,747 19,747Accumulatedlosses (120,363) (80,247)Otherreserves 12 (2,380) - ───────── ─────────Equityattributabletoequityholdersoftheparent 816,213 491,167Non-controllinginterests 13,564 13,454Islamicconvertiblesukuk 14 100,000 - ───────── ─────────Totalequity 929,777 504,621 ───────── ─────────LIABILITIESNon-currentliabilitiesProvisionforemployees’endofservicebenefits 17 1,640 1,480Provisionsandotherpayables 18 - 81,008Financeleases 15 55,204 57,550Bankborrowings 16 78,695 61,713 ───────── ───────── 135,539 201,751 ───────── ─────────CurrentliabilitiesFinanceleases 15 2,593 2,531Bankborrowings 16 323,835 313,736Tradeandotherpayables 18 129,802 53,550 ───────── ───────── 456,230 369,817 ───────── ─────────Totalliabilities 591,769 571,568 ───────── ─────────TOTALEQUITYANDLIABILITIES 1,521,546 1,076,189 ═════════ ═════════

Theconsolidatedfinancialstatementswereauthorisedforissuanceon19/3/2019bytheBoardofDirectorsandsignedonitsbehalfby:

AnasSobhiAhmedAtatrehViceChairman

CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASAT31DECEMBER2018

The accompanying notes 1 to 33 form an integral part of these consolidated financial statements.

36

Gulf Navigation Holding PJSC and its Subsidiaries

2018 2017

Notes AED’000 AED’000

Operatingrevenue 20 147,077 137,927

Operatingcosts 21 (128,401) (88,966) ───────── ─────────Grossprofit 18,676 48,961

Otherincome 1,260 790

Generalandadministrativeexpenses 22 (43,864) (26,030) ───────── ─────────Operating(loss)/profit (23,928) 23,721

Financeincome - 1,299

Financecosts 25 (22,293) (12,223) ───────── ─────────Financecosts-net (22,293) (10,924)

Liabilitiesnolongerrequiredwrittenback 18 8,727 31,673

Shareoflossofajointventure 8 (682) (1,810) ───────── ─────────(LOSS)/PROFITBEFOREINCOMETAX (38,176) 42,660

Incometax (1,830) (1,930) ───────── ─────────(LOSS)/PROFITFORTHEYEAR (40,006) 40,730 ═════════ ═════════

Othercomprehensiveincomefortheyear - - ───────── ─────────TOTALCOMPREHENSIVE(LOSS)/INCOMEFORTHEYEAR (40,006) 40,730 ═════════ ═════════

Attributableto:

Equityholdersoftheparent (40,116) 39,952

Non-controllinginterests 110 778 ───────── ─────────TOTALCOMPREHENSIVE(LOSS)/INCOMEFORTHEYEAR (40,006) 40,730 ═════════ ═════════

Earnings per share

-Basicearningspershare(AED) 24 (0.047) 0.074 ═════════ ═════════

-Dilutedearningspershare(AED) 24 (0.046) 0.074 ═════════ ═════════

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Fortheyearended31December2018


37


Attrib

utab

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fthep

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────────────────────────────────────────────────────

Sh

areStatu

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Accu

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Other

Non-co

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Islamic

Total

cap

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convertib

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AED’000

AED’000

AED’000

AED’000

AED’000

AED’000

AED’000

AED’000

Balan

ceat1Jan

uary2

017

551,6

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15,6

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-447,9

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--

447,9

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Dilu

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--

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Totalco

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--

39,9

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30

Transferto

statutoryreserve(N

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-4,0

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--

--

-

───────

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──────────────

───────

Balan

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ecember2

017

551,6

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19,7

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-491,1

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13,4

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21

Sharecap

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(Note1

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367,5

42

--

-367,5

42

--

367,5

42

Righ

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--

-(2,3

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--

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Islamicco

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--

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Totalco

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--

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110

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───────

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──────────────

──────────────

───────

Balan

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(120,3

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(2,3

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13

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00

929,7

77

───────

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CO

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Forth

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38


2018 2017 Notes AED’000 AED’000

OPERATINGACTIVITIES(Loss)/profitfortheyear (40,006) 40,730Adjustmentsfor:Depreciation 6 53,918 39,126Shareofnetlossinjointventures 8 682 1,810Provisionforemployees’endofservicebenefits 17 390 439Liabilitiesnolongerrequiredwrittenback 18 (8,727) (31,673)Vessels,propertyandequipmentwrittenoff - 26Gainondisposalofvessel 6 (1,007) -Provisionforimpairmentoftradereceivables 10 750 -Financecosts 25 22,293 12,223Financeincome - (1,299) ───────── ─────────Operatingcashflowsbeforeworkingcapitalchanges 28,293 61,382

Changesinworkingcapital:Inventories (1,481) (4,107)Duefromarelatedparty 1,972 2,799Tradeandotherreceivables (5,977) (6,256)Tradeandotherpayables (15,884) 6,484Duetorelatedparties - (224) ───────── ───────── 6,923 60,078Employees’endofservicebenefitspaid 17 (230) (789) ───────── ─────────Netcashflowsfromoperatingactivities 6,693 59,289 ───────── ─────────

INVESTINGACTIVITIESPurchaseofvessels,propertyandequipment 6 (82,635) (121,197) Netcashflowonacquisitionofbusiness 7 (400,000) -Proceedsfromdisposalofvessels,propertyandequipment 6 4,027 -Financeincomereceived - 1,299Transfer(to)/fromrestrictedcash (511) 10,087 ───────── ─────────Netcashflowsusedininvestingactivities (479,119)(109,811) ───────── ─────────

FINANCINGACTIVITIESProceedsfromIslamicconvertiblebonds 14 100,000 -Fundsreceivedfromrightsissue 12 367,542 -Rightsissuecostpaid 12 (2,380) -Proceedsfromnewborrowings 16 89,377 134,546Fundsinvestedbynon-controllinginterests - 2,562Repaymentofborrowings 16 (64,580) (50,148)Financecostspaid (22,438) (13,022) ───────── ─────────Netcashflowsgeneratedfromfinancingactivities 467,521 73,938 ───────── ─────────NET(DECREASE)/INCREASEINCASHANDCASHEQUIVALENTS(forward) (4,905) 23,416 ═════════ ═════════

CONSOLIDATED STATEMENT OF CASH FLOWS Fortheyearended31December2018


39


2018 2017


NET(DECREASE)/INCREASEINCASHAND

CASHEQUIVALENTS (4,905) 23,416

Cashandcashequivalentsatthebeginningofyear 28,035 4,619

───────── ─────────CASHANDCASHEQUIVALENTSATTHEENDOFYEAR 11 23,130 28,035

Restrictedcash 11,149 10,638

───────── ─────────TOTALCASHANDBANKBALANCES 34,279 38,673

═════════ ═════════

2018 2017


Significantnon-cashmovements

Purchaseofvessels,propertyandequipment 6 - (144,631)

═════════ ═════════

CONSOLIDATED STATEMENT OF CASH FLOWS Fortheyearended31December2018


40

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ASAT31DECEMBER2018


1 LEGALSTATUSANDACTIVITIES

GulfNavigationHoldingPJSC(“theCompany”)isaPublicJointStockCompanyincorporatedon30October2006aspertheResolutionoftheMinistryofEconomyNo.425of2006andinaccordancewithUAEFederalLawNo.(2)of2015.TheCompanyislistedontheDubaiFinancialMarket.TheCompanyisprimarilyengagedinseatransportofoilandpetroleumproductsandsimilarcommodities,shipcharter,shippinglinesoffreightandpassengertransportation,seafreightandpassengercharters,shippingservices,seashippinglinesagents,clearingandforwardingservices,cargoloadingandunloadingservices,cargopackaging,seacargoservicesandshipmanagementoperationsthroughitssubsidiariesaslistedbelow.TheCompanyoperatesfromthe39thFloor,APITrioTower,AlBarsha,Dubai,UnitedArabEmirates(“UAE”).TheCompanyanditsfollowingdirectlyorindirectlyownedsubsidiariesaretogetherreferredtoasthe“Group”intheseconsolidatedfinancialstatements:

Principal Countryof %equityinterest Subsidiaries activities incorporation 2018 2017

GulfNavigationMaritimeandOperationsManagementOwnedbyGulfNavigationHoldingLLC ShipCharter,etc. UAE 100 100GulfNavigationGroupFZCO ShipCharter,etc./Shipsand BoatsMaintenanceServices UAE 100 100GulfNavShipManagementFZE ShipCharter,etc./Shipsand BoatsMaintenanceServices UAE 100 100GulfCrudeCarriers(L.L.C) ShipCharter,etc. UAE 100 100GulfChemicalCarriers(L.L.C) ShipCharter,etc. UAE 100 100GulfNavigationPolimarMaritimeLLC SeaShippingLinesAgents UAE 60 60GulfShipManagementDMCC(deregisteredon6February2019) ShipManagement andOperationetc. UAE 100 100GulfNavigationandBrokerageLLC ShipBrokerage Oman 100 100GulfEyadahCorporation ShipOwning Panama 100 100GulfHuwaylatCorporation ShipOwning Panama 100 100GulfDeffiCorporation ShipOwning Panama 100 100GulfJalmudaCorporation ShipOwning Panama 100 100GulfFanatirCorporation ShipOwning Panama 100 100GulfNavigationMishrefLimited ShipOwning CaymanIslands 100 100GulfNavigationMirdifLimited ShipOwning CaymanIslands 100 100GulfNavigationSukukLimited Unlimited CaymanIslands 100 100GulfMaritimeShipManagementLLC* ShipManagementand Operations UAE 100 n/aGulfShipManagementCoLLC ShipManagementand Operations,etc UAE 100 100GulfNavigationMishrefLimited ShipCharter Liberia 100 100GulfNavigationMirdifLimited** ShipCharter Liberia 100 n/aGSShippingIncorporation ShipOwning MarshallIslands 100 100GulfAhmadiShippingInc ShipOwning MarshallIslands 100 100GulfShagraShippingInc ShipOwning MarshallIslands 100 100GulfNavigationShipOwningLLC*** ShipCharter,etc UAE 100 n/aGulfNavigationLivestockCarriersLtd.,Inc.**** ShipOwning Panama 100 n/aGulfNavigationLivestockCarriers1Ltd.,Inc.**** ShipOwning Panama 100 n/aGulfNavigationLivestockCarriers2Ltd.,Inc.**** ShipOwning Panama 100 n/aKabedahS.A.**** ShipOwning Panama 100 n/aAlMawashiCompaniaNavieraS.A.**** ShipOwning Panama 100 n/aDurangoShippingLtd.**** ShipOwning MarshallIslands 100 n/a

*incorporatedon25January2018**incorporatedon13February2018***incorporatedon7October2018****acquiredon21November2018

41

Anuual Report 2018



1 LEGALSTATUSANDACTIVITIES(continued)

TheGrouphasthefollowingbranches:

Principal Country of Branch activities incorporation

GulfNavigationHoldingDMCC(Br)* ShipCharter,etc. UAEGulfNavigationHoldingPJSC(ShjBr) ShipCharter,etc. UAEGulfNavigationHoldingPJSC(Br)GulfNavigationMaritimeandOperations ShipCharter,etc. KingdomofSaudiArabiaManagementOwnedbyGulfNavigation ShipManagementandHoldingLLC–AbuDhabiBranch** Operations,etc. UAEGulfNavigationPolimarMaritimeLLC-SharjahBranch SeaShippingLinesAgents UAEGulfNavigationPolimarMaritimeLLC WholesaleofSparePartsand-FujairahBranch SectionsTradingofShips andBoats,etc. UAEGulfShipManagementCoLLC ShipManagementand-Fujairah*** Operations,etc. UAE

*ceasedoperationson17April2018**incorporatedon25April2018***incorporatedon7July2018

TheGroupalsohasaninterestinthefollowingjointlycontrolledentity:

%Equityinterest

Jointlycontrolledentity Principalactivity Countryofincorporation 2018 2017

GulfStoltTankersDMCCO(“GST”)(inliquidationprocess) ShipCharter UAE 50% 50%

2.1 BASISOFPREPARATIONANDACCOUNTINGPOLICIES

Basis of preparationTheconsolidatedfinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”)andinterpretationsissuedbytheIFRSInterpretationsCommittee(IFRSIC)applicabletocompaniesreportingunderIFRS.TheconsolidatedfinancialstatementscomplywithIFRSasissuedbytheInternationalAccountingStandardsBoard(IASB).Theseconsolidatedfinancialstatementshavebeenpreparedunderthehistoricalcostconvention.

ThepreparationofconsolidatedfinancialstatementsinconformitywithIFRSrequirestheuseofcertaincriticalaccountingestimates.ItalsorequiresmanagementtoexerciseitsjudgementintheprocessofapplyingtheGroup’saccountingpolicies.Theareasinvolvingahigherdegreeofjudgementorcomplexity,orareaswhereassumptionsandestimatesaresignificanttotheconsolidatedfinancialstatementsaredisclosedinNote4.

Basis of consolidationTheconsolidatedfinancialstatementscomprisethefinancialstatementsoftheCompanyandentitiescontrolledbytheCompany(itssubsidiaries)asat31December2018.Controlisachievedwhereallthefollowingcriteriaaremet:

(a)theCompanyhaspoweroveranentity;(b)theCompanyhasexposure,orrights,tovariablereturnsfromitsinvolvementwiththeentity;and(c)theCompanyhastheabilitytouseitspowerovertheentitytoaffecttheamountoftheCompany’sreturns.

When theGrouphas less thanamajorityof thevotingor similar rightsofan investee, theGroupconsidersall relevant factsandcircumstancesinassessingwhetherithaspoweroveraninvestee,including:

- Thecontractualarrangementwiththeothervoteholdersoftheinvestee- Rightsarisingfromothercontractualarrangements

- TheGroup’svotingrightsandpotentialvotingrights

42



2.1 BASISOFPREPARATIONANDACCOUNTINGPOLICIES(continued)

Basisofconsolidation(continued)

TheGroupre-assesseswhetherornotitcontrolsaninvesteeiffactsandcircumstancesindicatethattherearechangestooneormoreofthethreeelementsofcontrol.ConsolidationofasubsidiarybeginswhentheGroupobtainscontroloverthesubsidiaryandceaseswhentheGrouplosescontrolofthesubsidiary.Assets,liabilities,incomeandexpensesofasubsidiaryacquiredordisposedofduringtheyearareincludedintheconsolidatedfinancialstatementsfromthedatetheGroupgainscontroluntilthedatetheGroupceasestocontrolthesubsidiary.

In 2017, theGroup sold 40%of theGroup’s shareholding inGulfNavigation PolimarMaritime LLC (previously known asGulfNavigationMaritimeLLC)(asubsidiary)effectivefrom1January2017inexchangeforcashandin-kindconsiderationtotallingofAED12,676thousand.InaccordancewithIFRS10–ConsolidatedFinancialStatements,thenetgainofAED3,245thousandonthesaleoftheinterestinGulfNavigationPolimarMaritimeLLChasbeencrediteddirectlyagainstaccumulatedlossesintheconsolidatedstatementofchangesinequityasanequitytransaction.

SubsidiariesSubsidiariesareallentities(includingstructuredentities)overwhichtheGrouphascontrol.TheGroupcontrolsanentitywhentheGroupisexposedto,orhasrightsto,variablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowertodirecttheactivitiesoftheentity.SubsidiariesarefullyconsolidatedfromthedateonwhichcontrolistransferredtotheGroup.Theyaredeconsolidatedfromthedatethatcontrolceases.

TheacquisitionmethodofaccountingisusedtoaccountforbusinesscombinationsbytheGroup.

Inter-companytransactions,balances,unrealisedgainsontransactionsbetweenGroupcompaniesareeliminated.Unrealisedlossesarealsoeliminatedunlessthetransactionprovidesevidenceofanimpairmentofthetransferredasset.AccountingpoliciesofsubsidiarieshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbytheGroup.Non-controllinginterestsintheresultsandequityofsubsidiariesareshownseparatelyintheconsolidatedstatementofprofitorloss,consolidatedstatementofcomprehensiveincome,consolidatedstatementofchangesinequityandconsolidatedstatementoffinancialpositionrespectively.

Joint arrangementsUnderIFRS11JointArrangementsinvestmentsinjointarrangementsareclassifiedaseitherjointoperationsorjointventures.Theclassificationdependsonthecontractualrightsandobligationsofeachinvestor,ratherthanthelegalstructureofthejointarrangement.TheGrouphasassessedthenatureofitsjointarrangementsanddeterminedthemtobejointventures.

Interests in joint ventures are accounted for using the equitymethod, after initially being recognised at cost in the consolidatedstatementoffinancialposition.

Equity methodUndertheequitymethodofaccounting,interestsinjointventuresareinitiallyrecognisedatcostandadjustedthereaftertorecognisetheGroup’sshareofthepost-acquisitionprofitsorlossesoftheinvesteeinprofitorloss,andtheGroup’sshareofmovementsinothercomprehensiveincomeoftheinvesteeinothercomprehensiveincome.Dividendsreceivedorreceivablesfromassociatesandjointventuresarerecognisedasareductioninthecarryingamountoftheinvestment.

WhentheGroup’sshareoflossesinanequity-accountedinvestmentequalsorexceedsitsinterestintheentity,includinganyotherunsecuredlong-termreceivables,theGroupdoesnotrecognisefurtherlosses,unlessithasincurredobligationsormadepaymentsonbehalfoftheotherentity.

UnrealisedgainsontransactionsbetweentheGroupanditsjointventuresareeliminatedtotheextentoftheGroup’sinterestinthejointventures.Unrealisedlossesarealsoeliminatedunlessthetransactionprovidesevidenceofanimpairmentoftheassettransferred.AccountingpoliciesofequityaccountedinvesteeshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbytheGroup.

ThecarryingamountofjointventuresistestedforimpairmentinaccordancewiththepolicydescribedinNote2.3.

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2.1 BASISOFPREPARATIONANDACCOUNTINGPOLICIES(continued)

Basisofconsolidation(continued)

Changes in ownership interests

TheGrouptreatstransactionswithnon-controlledintereststhatdonotresultinalossofcontrolastransactionswithequityownersof

thegroup.Achangeinownershipinterestresultsinanadjustmentbetweenthecarryingamountsofthecontrollingandnon-controlling

interests to reflect their relative interests in the subsidiary.Anydifferencebetween theamountof theadjustment tonon-controlling

interestsandanyconsiderationpaidorreceivedisrecognisedinaseparatereservewithinequityattributabletoownersoftheGroup.

WhentheGroupceasestoconsolidateorequityaccountforaninvestmentbecauseofalossofcontrol,jointcontrolorsignificantinfluence,

anyretainedinterestintheentityisremeasuredtoitsfairvaluewiththechangeincarryingamountrecognisedinprofitorloss.Thisfair

valuebecomesthe initialcarryingamountfor thepurposesofsubsequentlyaccountingfor theretainedinterestasanassociate, joint

ventureorfinancialasset.Inaddition,anyamountspreviouslyrecognisedinothercomprehensiveincomeinrespectofthatentityare

accountedforasiftheGrouphaddirectlydisposedoftherelatedassetsorliabilities.Thismaymeanthatamountspreviouslyrecognisedin

othercomprehensiveincomearereclassifiedtoprofitorloss.

Iftheownershipinterestinajointventureoranassociateisreducedbutjointcontrolorsignificantinfluenceisretained,onlyaproportionate

shareoftheamountspreviouslyrecognisedinothercomprehensiveincomearereclassifiedtoprofitorlosswhereappropriate.

Going concern

Asofthedateofauthorisationoftheseconsolidatedfinancialstatements,theGrouphasdemonstrateditsabilitytoimproveitsfinancial

positionbyraisingasignificantamountofnewequityandbyreachingagreementforfullandfinalsettlementwithremainingcounter-

parties.Inaddition,theGroupisintheprocessofrefinancingoneofitsloanfacilitieswithnewlenders.TheDirectors,afterreviewing

theGroup’savailablesourcesoffunding(eitherthroughbankloanoradditionalequityincludingissuanceofsukukorotheralternative

models); cashflow forecasts and strategicplans for aperiodofnot less than twelve (12)months from thedateof the signingof

theseconsolidatedfinancial statements,havea reasonableexpectation that theGroupwillhaveadequateresources tocontinue in

operationalexistencefortheforeseeablefuture.TheGroupthereforecontinuestoadoptthegoingconcernbasisinpreparingthese


2.2 CHANGESINACCOUNTINGPOLICIESANDDISCLOSURES

TheaccountingpoliciesadoptedbytheGroupareconsistentwiththoseofthepreviousfinancialyear,exceptforthefollowingnewand

relevantamendedIFRSandIFRICinterpretations:

(a) Newstandards,interpretationsandamendmentsadoptedbytheGroup:

Theaccountingpoliciesadopted in thepreparationof theconsolidatedfinancial statementsareconsistentwith those followed in the

preparationof theGroup’s consolidatedfinancial statements for theyearended31December2018,except for theadoptionofnew

standardsandinterpretationseffectiveasof1January2019.

• IFRS9FinancialInstruments

• IFRS15Revenuefromcontractswithcustomers

• AmendmentstoIFRS2ClassificationandMeasurementofShare-basedPaymentTransactions

• AmendmentstoIFRS4ApplyingIFRS9FinancialInstrumentswithIFRS4InsuranceContracts

• AmendmentstoIAS40TransfersofInvestmentProperty

• IFRICInterpretation22ForeignCurrencyTransactionsandAdvanceConsideration

• AnnualImprovementPlanIFRS1First-timeAdoptionofInternationalFinancialReportingStandards–Deletionofshort-

termexemptionsforfirst-timeadopters

• AmendmentstoIAS28InvestmentsinAssociatesandJointVentures–Clarificationthatmeasuringinvesteesatfairvalue

throughprofitorlossisaninvestment–by–investmentchoice

44



2.2 CHANGESINACCOUNTINGPOLICIESANDDISCLOSURES(continued)

(a) Newstandards,interpretationsandamendmentsadoptedbytheGroup:(continued)

TheadoptionoftheabovestandardsandinterpretationsdidnothaveanymaterialimpactontheconsolidatedfinancialstatementsoftheGroupexceptforIFRS9andIFRS15discussedbelow.

• IFRS 9 Financial InstrumentsIFRS9FinancialInstrumentsreplacesIAS39FinancialInstruments:RecognitionandMeasurementforannualperiodsbeginningonorafter1January2018,bringingtogetherallthreeaspectsoftheaccountingforfinancialinstruments:classificationandmeasurement;impairment;andhedgeaccounting.

TheGroupadoptedIFRS9from1January2018.TheeffectofadoptingIFRS9is,asfollows:

ClassificationandmeasurementFrom1January2018,theGroupclassifiesitsfinancialassetsinthefollowingmeasurementcategories:

• thosetobemeasuredsubsequentlyatfairvalue(eitherthroughOCIorthroughprofitorloss),and• thosetobemeasuredatamortisedcost.

Theclassificationdependsontheentity’sbusinessmodelformanagingthefinancialassetsandthecontractualtermsofthecashflows.

Forassetsmeasuredatfairvalue,gainsandlosseswilleitherberecordedinprofitorlossorOCI.Forinvestmentsinequityinstrumentsthatarenotheldfortrading,thiswilldependonwhetherthegrouphasmadeanirrevocableelectionatthetimeofinitialrecognitiontoaccountfortheequityinvestmentatfairvaluethroughothercomprehensiveincome(FVOCI).

TheGroupreclassifiesdebtinvestmentswhenandonlywhenitsbusinessmodelformanagingthoseassetschanges.

Regularwaypurchasesandsalesoffinancialassetsarerecognisedontrade-date,thedateonwhichthegroupcommitstopurchaseorselltheasset.Financialassetsarederecognisedwhentherightstoreceivecashflowsfromthefinancialassetshaveexpiredorhavebeentransferredandthegrouphastransferredsubstantiallyalltherisksandrewardsofownership.

Atinitialrecognition,theGroupmeasuresafinancialassetatitsfairvalueplus,inthecaseofafinancialassetnotatfairvaluethroughprofitorloss(FVPL),transactioncoststhataredirectlyattributabletotheacquisitionofthefinancialasset.TransactioncostsoffinancialassetscarriedatFVPLareexpensedinprofitorloss.

Financial assetswithembeddedderivatives are considered in their entiretywhendeterminingwhether their cashflowsare solelypaymentofprincipalandinterest.

Impairment TheadoptionofIFRS9requirestheGrouptoaccountforimpairmentlossesforfinancialassetsbyreplacingIAS39’sincurredlossapproachwithaforward-lookingExpectedCreditLoss(ECL)approach.

IFRS9requirestheGrouptorecordanallowanceforECLsforallloansandotherdebtfinancialassetsnotheldatfairvaluethroughprofitorloss(FVPL).ECLsarebasedonthedifferencebetweenthecontractualcashflowsdueinaccordancewiththecontractandallthecashflowsthattheGroupexpectstoreceive.Theshortfallisthendiscountedatanapproximationtotheasset’soriginaleffectiveinterestrate.

Fortradeandotherreceivables,theGrouphasappliedthestandard’ssimplifiedapproachandhascalculatedECLsbasedonlifetimeexpectedcredit losses.TheGrouphasestablishedaprovisionmatrix that isbasedon theGroup’shistoricalcredit lossexperience,adjustedforforward-lookingfactorsspecifictothedebtorsandtheeconomicenvironment.

TheGroupconsidersafinancialassetindefaultwhencontractualpaymentare180dayspastdue.However,incertaincases,theGroupmayalsoconsiderafinancialassettobeindefaultwheninternalorexternalinformationindicatesthattheGroupisunlikelytoreceivetheoutstandingcontractualamountsinfullbeforetakingintoaccountanycreditenhancementsheldbytheGroup.

ManagementassessedtheexpectedcreditlossesasprescribedbytherequirementsofIFRS9againsttradeandotherreceivablesandconcludedthattherewasnomaterialimpactontheconsolidatedfinancialstatements.

Hedge accountingTheGroupdoesnot enter intohedges and as such, thehedging requirements of IFRS9didnothave any impact on theGroup’s


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(a) Newstandards,interpretationsandamendmentsadoptedbytheGroup:(continued)

• IFRS 15 Revenue from Contracts with Customers

IFRS15supersedesIAS11ConstructionContracts,IAS18RevenueandrelatedInterpretationsanditapplies,withlimitedexceptions,

toallrevenuearisingfromcontractswithitscustomers.IFRS15establishesafive-stepmodeltoaccountforrevenuearisingfrom

contractswith customers and requires that revenuebe recognisedat anamount that reflects the consideration towhichanentity

expectstobeentitledinexchangefortransferringgoodsorservicestoacustomer.

IFRS15requiresentitiestoexercisejudgement,takingintoconsiderationalloftherelevantfactsandcircumstanceswhenapplying

each step of themodel to contractswith their customers.The standard also specifies the accounting for the incremental costs of

obtainingacontractandthecostsdirectlyrelatedtofulfillingacontract.Inaddition,thestandardrequiresextensivedisclosures.

TheGroupadoptedIFRS15usingthemodifiedretrospectivemethodofadoptionwiththedateofinitialapplicationof1January2018.

Underthismethod,thestandardcanbeappliedeithertoallcontractsatthedateofinitialapplicationoronlytocontractsthatarenot

completedatthisdate.TheGroupelectedtoapplythestandardtoallcontractsasat1January2018.

Further,theGroupisprimarilyengagedinseatransportofoilandpetroleumproductsandsimilarcommodities,shipcharter,shipping

linesoffreightandpassengertransportation,seafreightandpassengercharters,shippingservices,seashippinglinesagents,clearing

andforwardingservices,cargoloadingandunloadingservices,cargopackaging,seacargoservicesandshipmanagementoperations.

Theservicescanbeclassifiedascharteringandshippingservices. Therevenues forcharteringarerecognisedbasedonfixeddaily

ratewhileshippingservicesarerecognisedasperhireddaysonly.TheGroupdoesnotprovidewarrantiesordiscountsrelatingtothe

servicesrendered.ManagementconcludedthatIFRS15wouldnothaveanyimpactontheGroup’sconsolidatedfinancialstatements

asthecurrentrevenuerecognitionpolicyisinlinewithIFRS15.

Furthermore,managementassessedthat theGroupisactingas theprincipal inallof itsarrangements.TheGroupreceivescertain

advancesfromitscustomersastheperiodbetweenthetransferofpromisedgoodsorservicestothecustomerandwhenthecustomer

paysforthatgoodsorservicesislessthanayear.

(b) Standardsissuedbutnotyeteffective

Thenewandamendedstandardsandinterpretationsthatareissued,butnotyeteffective,uptothedateofissuanceoftheGroup’s

consolidatedfinancialstatementsaredisclosedbelow.TheGroupintendstoadoptthesenewandamendedstandardsandinterpretations,

ifapplicable,whentheybecomeeffective.

Management’sassessmentofimpactonimplementationofIFRS16ispresentedbelow.Further,managementdoesnotexpectmaterial

impactontheGroup’sconsolidatedfinancialstatementsonaccountofotherstandards,amendmentsandinterpretations.

• IFRS 16 Leases

IFRS16wasissuedinJanuary2017anditreplacesIAS17Leases,IFRIC4DeterminingwhetheranArrangementcontainsaLease,SIC-

15OperatingLeases-IncentivesandSIC-27EvaluatingtheSubstanceofTransactionsInvolvingtheLegalFormofaLease.IFRS16setsout

theprinciplesfortherecognition,measurement,presentationanddisclosureofleasesandrequireslesseestoaccountforallleasesundera

singleon-balancesheetmodelsimilartotheaccountingforfinanceleasesunderIAS17.Thestandardincludestworecognitionexemptions

forlessees–leasesof’low-value’assets(e.g.,personalcomputers)andshort-termleases(i.e.,leaseswithaleasetermof12monthsor

less).Atthecommencementdateofalease,alesseewillrecognisealiabilitytomakeleasepayments(i.e.,theleaseliability)andanasset

representingtherighttousetheunderlyingassetduringtheleaseterm(i.e.,theright-of-useasset).Lesseeswillberequiredtoseparately

recognisetheinterestexpenseontheleaseliabilityandthedepreciationexpenseontheright-of-useasset.

Lesseeswillbealsorequiredtoremeasuretheleaseliabilityupontheoccurrenceofcertainevents(e.g.,achangeintheleaseterm,

achange in future leasepayments resulting fromachange inan indexor rateused todetermine thosepayments).The lesseewill

generallyrecognisetheamountoftheremeasurementoftheleaseliabilityasanadjustmenttotheright-of-useasset.

46




(b) Standardsissuedbutnotyeteffective(continued)

• IFRS 16 Leases (continued)

LessoraccountingunderIFRS16issubstantiallyunchangedfromtoday’saccountingunderIAS17.Lessorswillcontinuetoclassify

allleasesusingthesameclassificationprincipleasinIAS17anddistinguishbetweentwotypesofleases:operatingandfinanceleases.

IFRS16,whichiseffectiveforannualperiodsbeginningonorafter1January2019,requireslesseesandlessorstomakemoreextensive

disclosuresthanunderIAS17.

IFRS16iseffectiveforannualperiodsbeginningonorafter1January2019.Earlyapplicationispermitted,butnotbeforeanentity

appliesIFRS15.Alesseecanchoosetoapplythestandardusingeitherafullretrospectiveoramodifiedretrospectiveapproach.The

standard’stransitionprovisionspermitcertainreliefs.

TheGroupiscurrentlyassessingthepotentialeffectofIFRS16onitsconsolidatedfinancialstatements.

• IFRS17InsuranceContracts(1January2021)• IFRICInterpretation23UncertaintyoverIncomeTaxTreatments(1January2019)• AmendmentstoIFRS9–PrepaymentFeatureswithNegativeCompensation(1January2019)• AmendmentstoIFRS10andIAS28:SaleorContributionofAssetsbetweenanInvestoranditsAssociateorCompany

(effectivedatenotdecided)• AmendmentstoIAS19:PlanAmendment,CurtailmentorSettlement(1January2019)• AmendmentstoIAS28–Long-termInterestsinAssociatesandJointVentures(1January2019)• AnnualImprovementPlanIFRS3BusinessCombinations–Previouslyheldinterestsinajointoperation(1 January2019)• AnnualImprovementPlanIFRS11JointArrangements–Previouslyheldinterestsinajointoperation(1 January2019)• AnnualImprovementPlanIAS12IncomeTaxes–Incometaxconsequencesofpaymentsonfinancialinstrumentsclassified

asequity(1January2019)

• AnnualImprovementPlanIAS23BorrowingCosts–Borrowingcostseligibleforcapitalisation(1January2019)

2.3 SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES

Foreigncurrencytranslation

Functional and presentation currency

ItemsincludedinthefinancialstatementsofeachoftheGroup’ssubsidiariesandjointlycontrolledentities(together, “entities”)are

measuredusingthecurrencyoftheprimaryeconomicenvironmentinwhichtheentitiesoperate(“thefunctionalcurrency”).Since

mostofthetransactionsoftheentitiesaredenominatedinUSDollars(“USD”)orcurrenciespeggedtotheUSD,thefunctionalcurrency

oftheentitiesisUSD.However,theconsolidatedfinancialstatementsoftheGrouparepresentedinUnitedArabEmiratesDirhams

(“AED”),whichisthepresentationcurrencyoftheGroup.AmountsinUSDhavebeentranslatedintoAEDattherateofUSD1=AED

3.66asthereisaconstantpegbetweenUSDandAED.

• Transactions and balancesForeigncurrencytransactionsaretranslatedintothefunctionalcurrencyusingtheexchangeratesat thedatesofthetransactions.

Foreignexchangegainsandlossesresultingfromthesettlementofsuchtransactionsandfromthetranslationofmonetaryassetsand

liabilitiesdenominatedinforeigncurrenciesatyearendexchangeratesaregenerallyrecognisedinprofitorloss.Theyaredeferred

in equity if they relate toqualifying cashflowhedges andqualifyingnet investmenthedgesor are attributable topart of thenet

investmentinaforeignoperation.

Foreignexchangegainsand losses thatrelate tobankborrowingsandcashandcashequivalentsarepresented in theconsolidated

statementofcomprehensiveincomewithin‘financeincomeorcosts’.Allotherforeignexchangegainsandlossesarepresentedinthe

consolidatedstatementofcomprehensiveincomewithin‘otherincome’.

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2.3 SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)

Foreigncurrencytranslation(continued)

Group companies

TheresultsandfinancialpositionofalltheGroupsubsidiaries(noneofwhichhasthecurrencyofahyperinflationaryeconomy)

thathaveafunctionalcurrencydifferentfromthepresentationcurrencyaretranslatedintothepresentationcurrencyasfollows:

• assetsandliabilitiesforeachstatementoffinancialpositionpresentedaretranslatedattheclosingrateatthedateofthatstatementoffinancialposition;

• income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this averageisnotareasonableapproximationofthecumulativeeffectoftheratesprevailingonthetransactiondates,inwhichcaseincomeandexpensesaretranslatedattherateonthedatesofthetransactions);and

• allresultingexchangedifferencesarerecognisedinothercomprehensiveincome.

Business combinations

Theacquisitionmethodofaccountingisusedtoaccountforallbusinesscombination,regardlessofwhetherequityinstrumentsor

otherassetsareacquired.Theconsiderationtransferredfortheacquisitionofasubsidiarycomprisesthe:• fairvaluesoftheassetstransferred;• liabilitiesincurredtotheformerownersoftheacquiredbusiness;• equityinterestedissuedbytheGroup;• fairvalueofanyassetorliabilityresultingfromacontingentconsiderationarrangement;and• fairvalueofanypre-existingequityinterestinthesubsidiary.

Identifiableassetsacquiredandliabilitiesandcontingentliabilitiesassumedinabusinesscombinationare,withlimitedexceptions,

measured initiallyat their fairvaluesat theacquisitiondate.TheGrouprecognisesanynon-controlling interest in theacquired

entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the

acquiredentity’snetidentifiableassets.

Acquisition-relatedcostsareexpensedasincurred.

Theexcessofthe:• considerationtransferred;• amountofanynon-controllinginterestintheacquiredentity;and• acquisition-date fair value of any previous equity interest in the acquired entity

Overthefairvalueofthenetidentifiableassetsacquiredisrecordedasgoodwill.Ifthoseamountsarelessthanthefairvalueofthe

netidentifiableassetsofthesubsidiaryacquired,thedifferenceisrecogniseddirectlyinprofitorlossasabargainpurchase.

Wheresettlementofanypartofcashconsiderationisdeferred,theamountspayableinthefuturearediscountedtotheirpresent

valueasatthedateofexchange.Thediscountrateusedistheentity’sincrementalborrowingrate,beingtherateatwhichasimilar

borrowingcouldbeobtainedfromanindependentfinancierundercomparabletermsandconditions.

Contingentconsiderationisclassifiedeitherasequityorafinancialliability.Amountsclassifiedasafinancialliabilityaresubsequently

remeasuredtofairvaluewithchangesinfairvaluerecognisedinconsolidatedstatementofcomprehensiveincome.

Ifthebusinesscombinationisachievedinstages,theacquisitiondatecarryingvalueoftheacquirer’spreviouslyheldequityinterest

intheacquireisremeasuredtofairvalueattheacquisitiondate.Anygainsorlossesarisingfromsuchremeasurementarerecognised

inconsolidatedstatementofcomprehensiveincome.

48




Vessels, property and equipmentVessels,propertyandequipmentare statedathistorical cost lessdepreciation.Historical cost includesexpenditure that isdirectlyattributabletotheacquisitionoftheitems.Subsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheGroupandthecostoftheitemcanbemeasuredreliably.Thecarryingamountofanycomponentaccountedforasaseparateassetisderecognisedwhenreplaced.Allotherrepairsandmaintenancearechargedtotheconsolidatedstatementofcomprehensiveincomeduringthefinancialyearinwhichtheyareincurred.Depreciation is computed using the straight-line method to allocate asset’s cost less their estimated residual values over their expected usefullives,asfollows:

Years

Vessels

• Chemicaltankers 10-25

• Livestock 20-40

Leasehold improvements 10

Equipment 2-5

Furniture&fixtures 5

Vehicles 5

(Drydockingcosts(includedincarryingamountofvessels 3-5

Theassets’residualvaluesandusefullivesarereviewed,andadjustedifappropriate,ateachreportingdate.

Wherethecarryingamountofanassetisgreaterthanitsestimatedrecoverableamount,itiswrittendownimmediatelytoitsrecoverableamount.

Gainsandlossesondisposalaredeterminedbycomparingproceedswithcarryingamountandincludedintheconsolidatedstatementofcomprehensiveincome.

Vesselsinthecourseofconstructionarecarriedatcostlessimpairment(ifany),ascapitalwork-in-progress,andaretransferredtothecategoryofvesselswhenavailableforuse.

Intangible assets

GoodwillGoodwillismeasuredasdescribedinNote7.Goodwillonacquisitionsofsubsidiariesisincludedinintangibleassets.Goodwillisnotamortisedbut it is testedfor impairmentannually,ormorefrequently ifeventsorchanges incircumstances indicatethat itmightbeimpaired,andiscarriedatcostlessaccumulatedimpairmentlosses.Gainsandlossesonthedisposalofanentityincludethecarryingamountofgoodwillrelatingtotheentitysold.Goodwillisallocatedtocash-generatingunitsforthepurposeofimpairmenttesting.Theallocationismadetothosecash-generatingunitsorgroupsofcash-generatingunitsthatareexpectedtobenefitfromthebusinesscombinationinwhichthegoodwillarose.Theunitsorgroupsofunitsareidentifiedatthelowestlevelatwhichgoodwillismonitoredforinternalmanagementpurposes,beingtheoperatingsegments.

InventoriesInventoriesarestatedatthelowerofcostandestimatednetrealisablevalue.Costisdeterminedonafirstinfirstout(FIFO)basisandincludesallattributableimportexpenses.Netrealisablevalueistheestimatedsellingpriceintheordinarycourseofbusiness,lessapplicablevariablesellingexpenses.

Impairment of non-financial assetsGoodwillisnotsubjecttoamortisationandistestedannuallyforimpairment,ormorefrequentlyifeventsorchangesincircumstancesindicatethattheymightbeimpaired.Otherassetsaretestedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscostsofdisposalandvalueinuse.Forthepurposesofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiablecashinflowswhicharelargelyindependentofthecashinflowsfromotherassetsorgroupsofassets(cash-generatingunits).Non-financialassetsotherthangoodwillthat

sufferedanimpairmentarereviewedforpossiblereversaloftheimpairmentattheendofeachreportingperiod.

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Financial assetsClassificationTheGroupclassifiesitsfinancialassetsasloansandreceivables.Theclassificationdependsonthepurposeforwhichthefinancialassetswereacquired.Managementdeterminestheclassificationofitsfinancialassetsatinitialrecognition.

Loans and receivablesLoansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket.Theyare included incurrentassets,except formaturitiesgreater than12monthsafter theendof the reportingperiod.Theseareclassifiedasnon-currentassets.TheGroup’sloansandreceivablescomprise‘tradeandotherreceivables’,‘duefromrelatedparties’intheconsolidatedstatementoffinancialposition(Notes11and19).

Regularwaypurchasesandsalesoffinancialassetsarerecognisedontrade-date,thedateonwhichtheGroupcommitstopurchaseorselltheasset.FinancialassetsarederecognisedwhentherightstoreceivecashflowsfromthefinancialassetshaveexpiredorhavebeentransferredandtheGrouphastransferredsubstantiallyalltherisksandrewardsofownership.

Loansandreceivablesare initiallymeasuredat fairvalueandsubsequentlycarriedatamortisedcostusing theeffectiveprofit ratemethod.TheGroupassesses,attheendofeachreportingdate,whetherthereisobjectiveevidencethatfinancialassetsareimpaired.

Trade receivablesTrade receivables are amounts due from customers for goods sold and services performed in the ordinary course of business. Ifcollectionisexpectedinoneyearorless,orinthenormaloperatingcycleofthebusinessiflonger,theyareclassifiedascurrentassets.Ifnot,theyarepresentedasnon-currentassets.Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using the effectiveprofit ratemethod,lessprovisionforimpairment.

Cash and cash equivalentsFor thepurposeof the statementof cashflows, cash and cashequivalents consistof cash inhand,bankbalances and short-termdepositswithanoriginalmaturityofthreemonthsorless,netofoutstandingbankoverdrafts.

Impairment of financial assetsTheGroupassessesattheendofeachreportingperiodwhetherthereisobjectiveevidencethatafinancialassetorgroupoffinancialassetsisimpaired.Afinancialassetoragroupoffinancialassetsisimpairedandimpairmentlossesareincurredonlyifthereisobjectiveevidenceofimpairmentasaresultofoneormoreeventsthatoccurredaftertheinitialrecognitionoftheasset(a‘lossevent’)andthatthelossevent(orevents)hasanimpactontheestimatedfuturecashflowsofthefinancialassetorgroupoffinancialassetsthatcanbereliablyestimated.

Theamountofthelossismeasuredasthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflows(excludingfuturecreditlossesthathavenotbeenincurred)discountedatthefinancialasset’soriginaleffectiveprofitrate.Thecarryingamountoftheassetisreducedandtheamountofthelossisrecognisedintheconsolidatedstatementofcomprehensiveincome.If,inasubsequentperiod,theamountoftheimpairmentlossdecreasesandthedecreasecanberelatedobjectivelytoaneventoccurringaftertheimpairmentwasrecognised(suchasanimprovementinthedebtor’screditrating),thereversalofthepreviouslyrecognisedimpairmentlossisrecognisedintheconsolidatedstatementofcomprehensiveincome.

Bank borrowingsBankborrowingsarerecognisedinitiallyatfairvalue,netoftransactioncostsincurred.Bankborrowingsaresubsequentlycarriedat amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in theconsolidatedstatementofcomprehensiveincomeovertheperiodofthebankborrowingsusingtheeffectiveprofitratemethod.

Feespaidontheestablishmentofloanfacilitiesarerecognisedastransactioncostsoftheloantotheextentthatitisprobablethatsomeorallofthefacilitywillbedrawndown.Inthiscase,thefeeisdeferreduntilthedraw-downoccurs.Totheextentthereisnoevidencethatitisprobablethatsomeorallofthefacilitywillbedrawndown,thefeeiscapitalisedasapre-paymentforliquidityservicesand

amortisedovertheperiodofthefacilitytowhichitrelates.

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Bankborrowings(continued)

Borrowings are removed from the consolidated statement of financial position when the obligation specified in the contract isdischarged,cancelledorexpired.Thedifferencebetweenthecarryingamountofafinancial liabilitythathasbeenextinguishedortransferredtoanotherpartyandtheconsiderationpaid,includinganynon-cashassetstransferredorliabilitiesassumed,isrecognisedintheconsolidatedstatementofcomprehensiveincomeasotherincomeorfinancecosts.

Wherethetermsofafinancialliabilityarerenegotiatedandtheentityissuesequityinstrumentstoacreditortoextinguishallorpartoftheliability(debtforequityswap),againorlossisrecognisedinprofitorloss,whichismeasuredasthedifferencebetweenthecarryingamountofthefinancialliabilityandthefairvalueoftheequityinstrumentsissued.

BorrowingsareclassifiedascurrentliabilitiesunlesstheGrouphasanunconditionalrighttodefersettlementoftheliabilityforatleast12monthsafterthereportingperiod.

Generalandspecificborrowingcoststhataredirectlyattributabletotheacquisition,constructionorproductionofqualifyingassetsarecapitalisedduringtheperiodoftimethatisrequiredtocompleteandpreparetheassetforitsintendeduseorsale.Qualifyingassetsareassetsthatnecessarilytakeasubstantialperiodoftimetogetreadyfortheirintendeduseorsale.

Investment incomeearnedon the temporary investmentof specificborrowingspending their expenditureonqualifying assets isdeductedfromtheborrowingcostseligibleforcapitalisation.

Otherborrowingcostsarerecognisedinconsolidatedstatementofcomprehensiveincomeintheperiodinwhichtheyareincurred.

Trade and other payablesTheseamountsrepresentliabilitiesforgoodsandservicesprovidedtotheGrouppriortotheendoffinancialyearwhichareunpaid.Theamountsareunsecuredandareusuallypaidwithin30daysofrecognition.Tradeandotherpayablesarepresentedascurrentliabilitiesunlesspaymentisnotduewithin12monthsafterthereportingperiod.Theyarerecognisedinitiallyattheirfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveprofitratemethod.

Taxes Incometaxexpenserepresentsthecurrenttax.Incometaxexpensealsoincludesanyinterest,finesandpenaltiespayabletothetaxauthorities.

Currenttaxassetsandliabilitiesforthecurrentandpriorperiodsaremeasuredattheamountexpectedtoberecoveredfromorpaidtothetaxationauthorities. ThetaxratesandtaxlawsusedtocomputetheamountarethosethatareenactedorsubstantivelyenactedatthereportingdateinthecountrieswheretheGroupoperatesandgeneratestaxableincome.

Managementperiodicallyevaluatespositionstakeninthetaxreturnswithrespecttosituationsinwhichapplicabletaxregulationsaresubjecttointerpretationandestablishesprovisionswhereappropriate.

Value added tax (VAT)ExpensesandassetsarerecognisednetoftheamountofVAT,exceptwhentheVATincurredonapurchaseofassetsorservicesisnotrecoverablefromthetaxationauthority,inwhichcase,theVATisrecognisedaspartofthecostofacquisitionoftheassetoraspartoftheexpenseitem,asapplicable

ThenetamountofVATrecoverablefrom,orpayableto,thetaxationauthorityis includedaspartofreceivablesorpayablesintheconsolidatedstatementoffinancialposition.

Derecognition of financial liabilitiesTheGroupderecognisesfinancialliabilitieswhen,andonlywhen,theGroup’sobligationsaredischarged,cancelledortheyexpire.Whereanexistingfinancialliabilityisreplacedbyanotherfromthesamelenderonsubstantiallydifferentterms,orthetermsofanexistingliabilityaresubstantiallymodified,thenthedifferenceintherespectivecarryingamountsisrecognisedintheconsolidated

statementofcomprehensiveincome.

51

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Offsetting of financial instruments

Financialassetsandfinancialliabilitiesareoffsetandthenetamountisreportedintheconsolidatedstatementoffinancialpositionifthere

isacurrentlyenforceablelegalrighttooffsettherecognisedamountsandthereisanintentiontosettleonanetbasis,torealisetheassets

andsettletheliabilitiessimultaneously.

Provisions

Provisionsforlegalclaims,servicewarrantiesandmakegoodobligationsarerecognisedwhentheGrouphasapresentlegalorconstructive

obligationasaresultofpastevents,itisprobablethatanoutflowofresourceswillberequiredtosettletheobligationandtheamountcan

bereliablyestimated.Provisionsarenotrecognisedforfutureoperatinglosses.

Wherethereareanumberofsimilarobligations,thelikelihoodthatanoutflowwillberequiredinsettlementisdeterminedbyconsidering

theclassofobligationsasawhole.Aprovisionisrecognisedevenifthelikelihoodofanoutflowwithrespecttoanyoneitemincludedin

thesameclassofobligationsmaybesmall.

Provisionsaremeasuredatthepresentvalueofmanagement’sbestestimateoftheexpenditurerequiredtosettlethepresentobligation

attheendofthereportingperiod.Thediscountrateusedtodeterminethepresentvalueisapre-taxratethatreflectscurrentmarket

assessmentsofthetimevalueofmoneyandtherisksspecifictotheliability.Theincreaseintheprovisionduetothepassageoftimeis

recognisedasfinancecost.

Provisionforemployees’endofservicebenefits

Provisionismade,usingactuarialtechniques,forthefullamountofendofservicebenefitsduetoemployeesinaccordancewithUAE

LabourLaw,fortheirperiodsofserviceuptotheendofreportingperiod.Theprovisionrelatingtoendofservicebenefitsisdisclosedas

anon-currentliability.

Share capital

Ordinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofnewordinarysharesoroptionsareshownin

equityasadeduction,netoftax,fromtheproceeds.

WhereanyGroupcompanypurchases theCompany’sequity sharecapital (treasury shares), theconsiderationpaid, includingany

directlyattributableincrementalcostsisdeductedfromequityattributabletotheCompany’sequityholders(reserveforownshares)

untilthesharesarecancelledorreissued.Wheresuchordinarysharesaresubsequentlyreissued,anyconsiderationreceived,netof

anydirectlyattributableincrementaltransactioncostsandtherelatedincometaxeffects,andisincludedinequityattributabletothe

Group’sequityholders.

Dividend distribution

Provisionismadefortheamountofanydividenddeclared,beingappropriatelyauthorisedandnolongeratthediscretionoftheCompany,

onorbeforetheendofthereportingperiodbutnotdistributedattheendofthereportingperiod.

Revenue recognition

Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivable,andrepresentsamountsreceivableforservicesrendered.

TheGrouprecognisesrevenuewhentheamountofrevenuecanbereliablymeasured;whenitisprobablethatfutureeconomicbenefits

willflowtotheentity;andwhenspecificcriteriahavebeenmetforeachoftheGroup’sactivities,asdescribedbelow:

Revenuesreceivedfromtimechartersarerecognisedonastraight-linebasisoverthedurationofthecharter.

Shippingservices,marineproductssalesanddistributionrevenuesconsistoftheinvoicedvalueofgoodssuppliedandservicesrendered,

netofdiscountsandreturnsandarerecognisedwhengoodsaredeliveredandserviceshavebeenperformed.

TheGrouphasconcluded,basedonitsreviewofrevenuearrangementswithcustomers,thatitistheprincipalinthemajorityofitsrevenue

arrangementssinceitistheprimaryobligorinalltherevenuearrangements,haspricinglatitude,andisalsoexposedtoinventoryandcreditrisks.

52




LeasesGroup as a lessee

Aleaseisclassifiedattheinceptiondateasafinanceleaseoranoperatinglease.Aleasethattransferssubstantiallyalltherisksand

rewardsincidentaltoownershiptotheGroupisclassifiedasafinancelease.

Financeleasesarecapitalisedatthecommencementoftheleaseattheinceptiondatefairvalueoftheleasedpropertyor,iflower,at

thepresentvalueoftheminimumleasepayments.Leasepaymentsareapportionedbetweenfinancechargesandreductionofthelease

liabilitysoastoachieveaconstantrateofinterestontheremainingbalanceoftheliability.Financechargesarerecognisedinfinance

costsintheconsolidatedstatementofcomprehensiveincome.

Aleasedassetisdepreciatedovertheusefullifeoftheasset.However,ifthereisnoreasonablecertaintythattheGroupwillobtain

ownershipbytheendoftheleaseterm,theassetisdepreciatedovertheshorteroftheestimatedusefullifeoftheassetandthelease

term.

Anoperating lease is a lease other than a finance lease.Operating lease payments are recognised as anoperating expense in the

statementofprofitorlossonastraight-linebasisovertheleaseterm.

Group as a lessor

LeaseincomefromoperatingleaseswheretheGroupisalessorisrecognisedinincomeonastraight-linebasisovertheleaseterm.The

respectiveleasedassetsareincludedintheconsolidatedstatementoffinancialpositionbasedontheirnature.

Current versus non-current classification

TheGrouppresentsassetsandliabilitiesintheconsolidatedstatementoffinancialpositionbasedoncurrent/non-currentclassification.

Anassetiscurrentwhenitis:

• Expectedtoberealisedorintendedtobesoldorconsumedinnormaloperatingcycle

• Held primarily for the purpose of trading

• Expectedtoberealisedwithintwelvemonthsafterthereportingperiod

or

• Cashorcashequivalentunlessrestrictedfrombeingexchangedorusedtosettlealiabilityforatleasttwelvemonthsafter

thereportingperiod.

A liability is current when:

• Itisexpectedtobesettledinthenormaloperatingcycle

• It is held primarily for the purpose of trading

• ItisduetobesettledwithintwelvemonthsafterthereportingperiodOr

• Thereisnounconditionalrighttodeferthesettlementoftheliabilityforatleasttwelvemonthsafterthereportingperiod

TheGroupclassifiesallotherliabilitiesasnon-current.

Segment reporting

Operatingsegmentsarereportedinamannerconsistentwiththeinternalreportingprovidedtothechiefoperatingdecisionmaker.

Thechiefoperatingdecision-maker,whoisresponsibleforallocatingresourcesandassessingperformanceoftheoperatingsegments,

hasbeenidentifiedastheGroup’sexecutivecommitteethatmakesstrategicdecisions.

Rounding of amounts

Allamountsdisclosedintheconsolidatedfinancialstatementsandnoteshavebeenroundedofftothenearestthousanddirhamsunless

otherwisestated.

53

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3 FINANCIALRISKMANAGEMENT

3.1 FINANCIALRISKFACTORS

OverviewTheGrouphasexposuretothefollowingrisksfromitsuseoffinancialinstruments:a) Marketrisk,b) Creditrisk,andc) Liquidityrisk.

ThisnotepresentsinformationabouttheGroup’sexposuretoeachoftheaboverisks,theGroup’sobjectives,policiesandprocessesformeasuringandmanagingriskandtheGroup’smanagementofcapital.

TheBoardofDirectorshasoverall responsibility for theestablishmentandoversightof theGroup’s riskmanagement framework.Group’sseniormanagementareresponsiblefordevelopingandmonitoringtheGroup’sriskmanagementpoliciesandreportregularlytotheBoardofDirectorsontheiractivities.

TheGroup’soverallriskmanagementprogrammefocusesontheunpredictabilityoffinancialmarketsandseekstominimisepotentialadverseeffectsontheGroup’sfinancialperformance.RiskmanagementiscarriedoutbythefinancedepartmentunderthepoliciesapprovedbytheBoardofDirectors.TheGroupFinanceteamidentifiesandevaluatesfinancialrisks incloseco-operationwiththeGroup’soperatingunits.TheBoardofDirectorsprovideswrittenprinciplesforoverallriskmanagement,aswellaswrittenpoliciescoveringspecificareas,suchasforeignexchangerisk,profitrateriskandcreditriskandinvestingexcessliquidity.KeyfinancialriskmanagementreportsareproducedmonthlyonaGrouplevelandprovidedtothekeymanagementpersonneloftheGroup.

Market riskForeignexchangeriskTheGroupisnotsignificantlyexposedtoforeignexchangeriskasthemajorityofitssales,purchasesandborrowingsareprimarilydenominatedintherespectivefunctionalcurrenciesofGroupcompaniesorinAEDwhichispeggedtoUSD.AmountsinUSDhavebeentranslatedintoAEDattherateofUSD1=AED3.66asthereisaconstantpegbetweenUSDandAED.

Price riskTheGroupisnotexposedtoanysignificantpricerisk.

Fair value profit rate riskTheGroupisnotexposedtoanysignificantfairvalueprofitrateriskduetochangesinprofitrates.

Cash flow profit rate risk TheGroup’sprofitrateriskprincipallyarisesfromlong-termborrowingsatvariablerates.BorrowingsissuedatvariableratesexposetheGrouptocashflowprofitraterisk.

TheGroup’sprofitrateriskismonitoredbytheGroup’smanagementonamonthlybasis.TheprofitrateriskpolicyisapprovedquarterlybytheBoardofDirectors.ManagementanalysestheGroup’sprofitrateexposureonadynamicbasis.Variousscenariosaresimulated,takingintoconsiderationrefinancing,renewalofexistingpositions,alternativefinancingandhedging.Basedonthesescenarios,theGroupcalculatestheimpactonprofitandlossofadefinedprofitrateshift.Thescenariosarerunonlyforliabilitiesthatrepresentthemajorprofit-bearingpositions.Thesimulationisdoneonamonthlybasistoverifythatthemaximumpotentiallossiswithinthelimitssetbymanagement.

Hadthebankborrowingprofitrateshiftedby50basispoints(inthecaseoffloatingprofitrates)andallothervariablesremainedunchanged,thenet(loss)/profitandequityoftheGroupwouldhavechangedbyAED1,764thousandfortheyearended31December2018(2017:AED1,530thousand)accordingly.

Credit riskCredit riskmainly arises from trade receivables, cash and bank balances and due from related parties.Only banks and financialinstitutionswhichareindependentlyratedorwithhighreputationareaccepted.Otherreceivablesandduefromrelatedparties,except

providedfor,arefullyrecoverableatthereportingdate.

54



Liquidity risk

55

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3 FINANCIALRISKMANAGEMENT(continued)

3.1 FINANCIALRISKFACTORS(continued)

Liquidity risk (continued)

ThefuturefinancecostinrespectofbankborrowingsamountstoAED44,883thousand(2017:AED69,154thousand).Thepayment

profileofthisfinancecostisasfollows:

2018 2017

AED’000 AED’000

Notlaterthanoneyear 12,614 18,145

Betweenoneyearandfiveyears 32,269 51,009 ───────── ─────────

44,883 69,154 ═════════ ═════════

3.2 CAPITALRISKMANAGEMENT

TheprimaryobjectiveoftheGroup’scapitalmanagementistomaintainanoptimalcapitalstructureinordertosupportitsbusiness

therebyincreasingshareholder’svalueandbenefitsforotherstakeholders.Inordertomaintainoradjustthecapitalstructure,the

Groupmayadjusttheamountofdividendspaidtoshareholders,orissuenewsharestoreducedebt.

TheGroupmonitorscapitalonthebasisofgearingratio.Thisratioiscalculatedasnetdebtdividedbytotalcapital.Netdebtrepresents

‘finance lease’, ‘bankborrowings’ and ‘other loans’ (partof ‘tradeandotherpayables’) as shown in the consolidated statementof

financialpositionless‘cashandcashequivalents’asshownintheconsolidatedstatementofcashflows.Totalcapitaliscalculatedas

‘totalequity’asshowninconsolidatedstatementoffinancialpositionplusnetdebt.

2018 2017

AED’000 AED’000

Totalborrowings(Notes15,16and18) 460,328 444,679

Cashandcashequivalents(Note11) (23,130) (28,035) ───────── ─────────

Netdebt 437,198 416,644

Totalequity 929,777 504,621 ───────── ─────────

Totalcapital 1,366,975 921,265 ═════════ ═════════

Gearingratio 31.9% 45.2% ═════════ ═════════

3.3 FAIRVALUEESTIMATION

TheGroupdidnothaveanyotherfinancialassetsorliabilitiesthataremeasuredatfairvalueat31December2018and2017.

56



4 CRITICALACCOUNTINGESTIMATESANDJUDGEMENTS

Estimatesandjudgementsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfactors,includingexpectationsof

futureeventsthatarebelievedtobereasonableunderthecircumstances.

TheGroupmakeestimatesandassumptionsconcerningthefuture.Theresultingaccountingestimateswill,bydefinition,seldomequal

therelatedactualresults.Theestimatesandassumptionsthathaveasignificantriskofcausingamaterialadjustmenttothecarrying

amountsofassetsandliabilitieswithinthenextfinancialyearareasbelow:

Impairmentofvessels,propertyandequipment

Managementassessestheimpairmentofvessels,propertyandequipmentwhenevereventsorchangesincircumstancesindicatethat

thecarryingvaluemaynotberecoverable.Factorsthatareconsideredimportantwhichcouldtriggeranimpairmentreviewinclude

thefollowing:

• Significantdeclineinanasset’smarketvaluebeyondthatwouldbeexpectedfromthepassageoftimeornormaluse;

• Significantchangesintheuseofitsassetsorthestrategyoftheoperationtowhichtheassetbelongs;

• Significantchangesinthetechnologyandregulatoryenvironments;and

• Evidencefrominternalreportingthatindicatesthattheeconomicperformanceofanassetis,orwillbe,worsethanexpected.

Ifsuchanindicationexists,animpairmenttestiscompletedbycomparingthecarryingvaluesofthecashgeneratingunitwiththeir

recoverableamounts.Therecoverableamountoftheassettakenintoconsiderationisitsvalue-in-use.

Usefullivesanddepreciationofvessels,propertyandequipment

Managementperiodicallyreviewsestimatedusefullivesanddepreciationmethodtoensurethatthemethodandperiodofdepreciation

areconsistentwiththeexpectedpatternofeconomicbenefitsfromtheseassets.

Classificationofleases-GroupasaLessor

TheGrouphasenteredintolongtermvesselleasingarrangements.TheGrouphasdetermined,basedonanevaluationofthetermsand

conditionsofthearrangements,suchastheleasetermnotconstitutingamajorpartoftheeconomiclifeofthevesselandthepresent

valueoftheminimumleasepaymentsnotamountingtosubstantiallyallofthefairvalueofthevessel,thatitretainsallthesignificant

risksandrewardsofownershipofthesepropertiesandaccountsforthecontractsasoperatingleases.

Group as a lessee

Aleaseisclassifiedattheinceptiondateasafinanceleaseoranoperatinglease.Aleasethattransferssubstantiallyalltherisksand

rewardsincidentaltoownershiptotheGroupisclassifiedasafinancelease.

Financeleaseiscapitalisedatthecommencementoftheleaseattheinceptiondatefairvalueoftheleasedpropertyor,iflower,atthe

presentvalueoftheminimumleasepayments.Leasepaymentsareapportionedbetweenfinancechargesandreductionofthelease

liabilitysoastoachieveaconstantrateofinterestontheremainingbalanceoftheliability.Financechargesarerecognisedinfinance

costsintheconsolidatedstatementofcomprehensiveincome.

A leasedasset isdepreciatedover theuseful lifeof theasset.However, if there isnoreasonablecertainty that theGroupwillobtain

ownershipbytheendoftheleaseterm,theassetisdepreciatedovertheshorteroftheestimatedusefullifeoftheassetandtheleaseterm.

Anoperating lease is a lease other than a finance lease.Operating lease payments are recognised as anoperating expense in the

statementofprofitorlossonastraight-linebasisovertheleaseterm.

Consolidation of subsidiaries

TheGrouphasevaluatedalltheinvesteeentitiesincludingspecialpurposeentitiestodeterminewhetheritcontrolstheinvesteeasper

thecriterialaidoutbyIFRS10:ConsolidatedFinancialStatements.TheGrouphasevaluated,amongstotherthings,itsownership

interest, the contractual arrangements inplace and its ability and the extentof its involvementwith the relevant activitiesof the

investeeentitiestodeterminewhetheritcontrolstheinvestee.

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4 CRITICALACCOUNTINGESTIMATESANDJUDGEMENTS(continued)

Impairment of receivablesAnestimateofthecollectibleamountoftradereceivableismadewhencollectionofthefullamountisnolongerprobable.Forindividuallysignificantamounts,thisestimationisperformedonanindividualbasis.Amountswhicharenotindividuallysignificant,butwhicharepastdue,areassessedcollectivelyandaprovisionappliedaccordingtothelengthoftimepastdue,basedonhistoricalrecoveryrates.

Atthereportingdate,grossreceivablesamountedtoAED18,737thousand(31December2017:AED 13,348thousand)withprovisionfordoubtfuldebtsofAED985thousand(31December2017:AED 235thousand).Anydifferencebetweentheamountsactuallycollectedinfutureperiodsandtheamountsexpectedwillberecognisedintheconsolidatedstatementofcomprehensiveincome.

Impairment of inventoriesInventoriesareheldatthelowerofcostandnetrealisablevalue.Wheninventoriesbecomeoldorobsolete,anestimateismadeoftheirnetrealisablevalue.For individuallysignificantamountsthisestimationisperformedonanindividualbasis.Amountswhicharenotindividuallysignificant,butwhichareoldorobsolete,areassessedcollectivelyandanallowanceagainstimpairmentappliedaccordingtotheinventorytypeandthedegreeofageingorobsolescence.

Revenue recognitionTheGrouphas concluded, basedon its reviewof revenue arrangementswith customers, that it is theprincipal in all of its revenuearrangementssinceitistheprimaryobligorinalltherevenuearrangements,haspricinglatitude,andisalsoexposedtoinventoryandcreditrisks.

TaxesTheGrouphasexposuretotaxesprimarilyintheKingdomofSaudiArabia.Significantjudgmentisinvolvedindeterminingtheprovisionfortax. Therearecertaintransactionsandcomputationsforwhichtheultimatetaxdeterminationisuncertainduringtheordinarycourseofbusiness. TheGrouprecognisesliabilitiesforexpectedtaxissuesbasedonestimatesofwhetheradditionaltaxeswillbedue.Wherethefinaltaxoutcomeofthesemattersisdifferentfromtheamountsthatwereinitiallyrecognised,suchdifferenceswillimpactthetaxprovisionintheperiodinwhichsuchdeterminationismade.

Provisions and contingenciesTheGroupisrequiredtoestimatetheamountofpresentobligationsasatthebalancesheetdatethatrequireprovisionstobemade.Thisrequirestheapplicationofsubjectivity informedbythecurrentpositionofeachmatter(be itrelatedto legaldisputes,arbitrationsorongoingnegotiations)andadvisefromexternaladvisors.

Impairment of goodwillTheGrouptestsannuallywhethergoodwillhassufferedanyimpairment,inaccordancewiththeaccountingpolicystatedinNote2.3.Therecoverableamountsofcash-generatingunits(“CGU”)havebeendeterminedbasedonvalue-in-usecalculations.Thesecalculationsrequiretheuseofestimates(Note7).

Managementhasusedthefollowingrevenuegrowthrateassumptionsindeterminationofthevalue-in-use:

Year1to3–0%to2%Years4–0%to23.4%Year5onwards–0%to2%

Iftherateprojectionswithinthenextfiveyearsarenotachieved,thegoodwillwouldbeimpairedinentirety.

IfthebudgetedgrossmarginusedinthevalueinusecalculationforthevesselcharteringCGU(excludingchemicaltankerswhichareunderlongtermtimecharter)hadbeen5%higher/lowerthanmanagement’sestimatesat31December2018and2017,noimpairmentchargewouldhavebeenrecognised.

Iftheestimatedcostofcapitalusedindeterminingthepre-taxdiscountrateforthevesselcharteringCGUhadbeen0.5%higher/lowerthanmanagement’sestimates,noimpairmentchargewouldhavebeenrecognised.

Whenusingmanagement’sweightedaveragecostofcapitalof8.42%,headroomequatestoAED264,427thousand.


58


5 OPERATINGSEGMENTS

Business segments

Operatingsegmentsarereportedinamannerconsistentwiththeinternalreportingprovidedtothechiefoperatingdecision-maker.The

chiefoperatingdecision-makerhasbeenidentifiedastheGroup’sExecutiveCommitteewhomakesstrategicdecisions.TheExecutive

CommitteereviewstheGroup’sinternalreportinginordertoassessperformanceandallocateresources.Managementhasdetermined

theoperatingsegmentsbasedonthesereports.

TheGroupcomprisesthefollowingmainbusinesssegments:

• Vesselowningandchartering:Charteringofvesselstocustomers;

• Shipmanagement:Technicalmanagementofvessels;

• Marineproductssalesanddistribution:Tradingofgoodssuchassupplies,chemicalsandgasesrequiredforships;

• Shippingandtechnicalservices:Providingagencyservicestoshipscallingatports;andprovidingworkshopservicesfor

boats

• Other:Includesmanagementofalldivisionsandadministrativeactivities.

Vesselowningandchartering,marineproductssalesanddistributionandshippingservicesmeetcriteriarequiredbyIFRS8,‘Operating

Segments’andreportedasseparateoperatingsegments.OthersegmentsdonotmeetthequantitativethresholdsrequiredbyIFRS8,

andtheresultsoftheseoperationsareincludedinthe‘Other’column.

Geographical segments

TheGroup’sExecutiveCommitteedoesnotconsiderthegeographicaldistributionoftheGroup’soperationstoberelevantfortheir

internalmanagementanalysisandthereforenogeographicalsegmentinformationhasbeendisclosed.

Alloperatingsegments’resultsarereviewedregularlybytheGroup’sExecutiveCommitteetomakedecisionsaboutresourcestobe

allocatedtothesegmentandassesstheirperformance,andforwhichdiscretefinancialinformationisavailable.


59

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NO

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ASA

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ECEMBER2018


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ASA

T31D

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5 OPERATINGSEGMENTS(continued)

Marine Shipping

Vessel product and

Inter

owningand Ship salesand technical

segment

chartering management distribution services

Other elimination Total

AED’000 AED’000 AED’000 AED’000

AED’000 AED’000 AED’000

Operatingrevenue 120,535 4,253 2,475 14,041

- (3,377) 137,927

Operatingcosts (81,033) - (2,032) (9,278)

- 3,377 (88,966)

Otherincome - - 730 -

1,229 (1,169) 790

Generalandadministrativeexpenses (2,769) (4,979) (484) (3,466)

(17,431) 1,169 (27,960)

Financeincome 7 - 11 39

1,242 - 1,299

Financecosts (10,102) (21) (133) (19)

(1,948) - (12,223)

Liabilitiesnolongerrequiredwrittenback - - - -

31,673 - 31,673

Shareofnetlossofjointventures (1,810) - - -

- - (1,810)

──────── ──────── ──────── ────────

──────── ──────── ────────

Reportablesegmentprofit 24,828 (747) 567 1,317

14,765 - 40,730

──────── ──────── ──────── ────────

──────── ──────── ────────

At31December2017

Reportablesegmentassets 868,397 15,967 3,684 22,589

1,128,778 (963,226) 1,076,189

──────── ──────── ──────── ────────

──────── ──────── ────────

Reportablesegmentliabilities 1,061,451 12,089 2,775 11,350

360,947 (877,044) 571,568

──────── ──────── ──────── ────────

──────── ──────── ────────


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AED’000

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892,5

14

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287

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72

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265,8

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(1,3

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1,1

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3,7

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Accu

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At1

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276,2

62

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62

1,8

28

273

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389,3

64

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At3

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315,1

59

1,4

57

1,8

93

79

507

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45

427,1

40

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1D

ecember2

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839,9

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734

424

24

-843,3

54

────────

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nan

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owever,

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ontracto

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63

Anuual Report 2018


7.1 BUSINESSCOMBINATION

During the year, theGroup obtained control ofGulfNavigation LivestockCarrier Ltd. Inc, awholly owned subsidiary ofAksabInvestmentsLLC,whichisregisteredintheRepublicofPanama,forapurchaseconsiderationofAED 420,000thousand.OutofAED420,000thousand,anamountofAED20,000thousandispayableasat31 December2018(Note18).

Thefollowingtablesummarisestherecognisedamountsofassetsandliabilitiesacquiredandconsiderationpaidatthedateofacquisition.

AED‘000Assets–Vessels 395,657 ───────Totalidentifiablenetassetsonaprovisionalfairvalue 395,657 ───────Less:Considerationpaidandpayable 420,000 ───────Goodwill 24,343 ═══════

Cashflowonacquisition AED‘000

Net cash acquired - ═══════Netcashoutflowonacquisition (400,000) ═══════

Thenetassetsrecognisedinthe31December2018consolidatedfinancialstatementswerebasedonaprovisionalassessmentoftheirfairvalueandaccordingly,goodwillofAED24,343thousandwasrecognisedonaprovisionalbasis.FairvaluewillbereassessedwithinthepermittedtimeperiodallowedunderIFRS.Fromthedateofacquisition,GulfNavigationLivestockCarrierLtd.Inc.contributedarevenueofAED13,480thousandandanetlossofAED1,877thousandtotheGroup.

7.2 GOODWILL

2018 2017 AED’000 AED’000

Balanceat1January 135,999 135,999Additionduringtheyear(Note7.1) 24,343 - ───────── ─────────Balanceat31December 160,342 135,999 ═════════ ═════════

ThegoodwillofAED135,999thataroseatthetimeoftheInitialpublicoffer(IPO)followingtheacquisitionforcashoftheexistingbusinessesbythefoundingshareholdersofGulfNavigationHoldingLLCfromtheoriginalshareholdersnetofimpairmentcharge.ThesebusinessesweretransferredinkindbythefoundingshareholdersofGulfNavigationHoldingLLCfora45%shareholdinginGulfNavigationHoldingPJSC.Thegoodwillhasbeenallocatedtothevesselowningandchartersegmentofthebusiness.

Managementreviewsthebusinessperformancebasedontypeofbusiness.Managementhasidentifiedthevesselowningandcharteringdivision,marineproductssalesanddistributiondivisionandagencydivisionasitsmaintypeofbusinesses.Goodwillismonitoredbymanagementattheoperatingsegmentlevel.

TherecoverableamountofallCGUshasbeendeterminedbasedonvalue-in-usecalculations.Thesecalculationsusepre-taxcashflowprojectionsbasedonestimatedcharterratesusingcurrentlyavailablemarketinformationandhistoricaltrendsforvesselswhicharenoton longtermtimecharter.However,withrespect tovesselswhichareontimecharter, formorethanfiveyears,aperiodtilltheendoftheircharterpartyagreementhasbeenusedforthevalueinusecalculations.Cashflowsbeyondthesignedcharterpartyagreementareextrapolatedusingtheestimatedgrowthrate.Thegrowthratedoesnotexceedthelong-termaveragegrowthratefor

thebusinessinwhichtheCGUoperates.

64



7.2 GOODWILL(continued)Keyassumptionsusedinvalueinusecalculationsare:

Gross margin

Grossmarginisbasedonthecurrentlevelofactivityandestimatedfuturecharterrates.

2018 2017

Growthrate 2% 2%

═════════ ═════════

Discount rates

Discountrateof8.42%(2017:7.32%)reflectsmanagement’sbenchmarkforevaluatinginvestmentproposals.Forsensitivityanalysis,

pleaserefertoNote4.

8 INVESTMENTINAJOINTVENTURE

2018 2017

AED’000 AED’000

Balanceat1January 300 117,238

Shareofnetlossinjointventures (682) (1,810)

Advancesgiventojointventuresearliernowappliedtowardspurchaseofvessels - (108,222)

Partialreturnofnon-reciprocalcapitalcontribution - (3,535)

Othermovements 382 (3,371)

───────── ─────────

Balanceat31December - 300

═════════ ═════════

InvestmentinajointventurerepresentstheGroup’s50%interestinGulfStoltTankersDMCCOwhoseprincipalactivityisshipowning.

ThejointventurewhichwasformedinaccordancewithanagreementwithStolt-NielsenIndianOceanMiddleEastServiceLimited.

Thejointventureiscurrentlyunderliquidation.

Summaryfinancialinformationofthejointventure,notadjustedforthepercentageownershipheldbytheGroupisasfollows:

GulfStoltTankersDMCCO

2018 2017

AED’000 AED’000

Currentassets 4,698 16,109

Currentliabilities (779) (1,092)

───────── ─────────

Netassets 3,919 15,017

═════════ ═════════

Revenue - 70,593

Expenses (682) (74,213)

───────── ─────────

Lossfortheyear (682) (3,620)

═════════ ═════════

TheGroupdidnotinvestinstocksorsharesduringtheyearended31December2018(2017:AED Nil).

65

Anuual Report 2018



9 INVENTORIES

2018 2017

AED’000 AED’000

Spareparts 9,223 10,368

Vesseloilandlubricants 4,411 1,854

Others 122 53

───────── ─────────

13,756 12,275

═════════ ═════════

InventoryconsumptionfortheyearwasAED7,785thousand(2017:AED4,869thousand).

10 TRADEANDOTHERRECEIVABLES

2018 2017

AED’000 AED’000

Current

Tradereceivables 18,737 13,348

Provisionforimpairmentoftradereceivables (985) (235)

───────── ─────────

17,752 13,113

Receivableondilutionofinvestmentinasubsidiary(Seenote2.1) 14,640 14,640

Advancetosuppliers 3,464 1,844

Prepayments 3,766 4,951

Receivabletowardssaleofvessel(Note6) 16,104 -

Otherreceivables 7,822 7,669

───────── ─────────

63,548 42,217

═════════ ═════════

TheGroupiscurrentlyindiscussionswiththeminorityshareholderintermsofthelatter’sfutureinvolvementintheGroup’ssubsidiary.

Afinalagreementisexpectedtobeagreedaftertheendofthereportingperiod.

Asat31December2018,tradereceivablesofAED17,752thousand(2017:AED13,113thousand)werepastduebutnotimpaired.

Theageingofthesetradereceivablesisasfollows.

2018 2017

AED’000 AED’000

0to90days 9,624 7,463

91to120days 628 843

121to150days 189 442

151to365days 1,815 1,082

Morethan365days 5,496 3,283

───────── ─────────

17,752 13,113

═════════ ═════════

66



10 TRADEANDOTHERRECEIVABLES(continued)

Asat31December2018,tradereceivableswithanominalvalueofAED 985housand(2017: AED 235 thousand)wereimpaired.Themovementintheprovisionforimpairmentofreceivablesisasfollows:

2018 2017 AED’000 AED’000

Balanceat1January 235 235Additions 750 - ───────── ─────────

Balanceat31December 985 235 ═════════ ═════════

Thecreation and release of provision for trade receivables is included in general and administrative expenses in the consolidatedstatementofcomprehensiveincome.Amountschargedtotheallowanceaccountaregenerallywrittenoffwhenthereisnoexpectationof recovery.Theother classeswithin trade and other receivables donot contain impaired assets. Trade and other receivables aredenominatedinAEDandUSD.Themaximumexposuretocreditriskfortradeandotherreceivablesatthereportingdateisthecarryingvalueofeachclassofreceivablementionedabovewhichapproximatetheirfairvalueatthereportingdate.TheGroupdoesnotholdanycollateralassecurity.

11 CASHANDBANKBALANCES

2018 2017 AED’000 AED’000

Cashonhand 420 255Cashatbanks 33,859 38,418 ───────── ─────────

Cashandbankbalances 34,279 38,673Restrictedcash (11,149) (10,638) ───────── ─────────

Cashandcashequivalents 23,130 28,035 ═════════ ═════════

Restrictedcashrepresentscashheldincertainbankaccountsforpaymentofdividendsanddrydockingcosts.

12 SHARECAPITAL

2018 2017 AED’000 AED’000

Authorised:1,000,000,000sharesofAED1each 1,000,000 1,000,000 ═════════ ═════════

Issuedandfullypaidup:919,209,250shares(2017:551,666,666shares)ofAED1each 919,209 551,667 ═════════ ═════════

On6March2018,theCompanyissued367,542,584ordinarysharesofAED1each,whichwerefullysubscribedandpaid-up.Thenewcapitalwasraisedthrougharightsissueofferedtoexistingshareholders.TheGroupincurredacostofAED2,380thousandinconnectionwiththerightsissuewhichispresentedas“Otherreserves”intheconsolidatedstatementofchangesinequity.Subsequenttotheyear-end,theauthorisedcapitalwasincreasedto1,019,209,250sharesofAED1each.Further,theshareswerefullysubscribedbythewayofconversionoftheIslamicconvertibleSukukusingaconversionrateofAED1persukuk.

67

Anuual Report 2018



13 STATUTORYRESERVE

AsrequiredbytheUAEFederalLawNo.(2)of2015,andtheCompany’sArticlesofAssociation,10%oftheprofitfortheyearisrequiredtobetransferredtoastatutoryreserve.TheCompanymayresolvetodiscontinuesuchannualtransferswhenthereservetotals50%ofthepaid-upsharecapital.Thereserveisnotavailablefordistributionexceptinthecircumstancesasstipulatedbythelaw.Duringtheyear,anamountofAEDNIL(2017:AED4,073thousand)wastransferredtothestatutoryreserve.

14 ISLAMICCONVERTIBLESUKUK

2018 2017 AED’000 AED’000

Islamicconvertiblesukuk 100,000 - ═════════ ═════════

On18November2018,theGroupissuedIslamicconvertiblesukuk(the“Sukuk”)foravalueofAED100,000thousandbywayofaprivateplacementtoWahatAlZaweyaInvestment&RealEstateDevelopmentLLC,inaccordancewith,interalia,thefollowingterms:

- Security:MandatoryConvertibleIslamicSukuk- TypeofSukuk–incompliancewithIslamicShari’a- ValueofSukuk–AED100,000thousand- NumberofSukuk–100,000,000- Typeofconversion:MandatorytobeconvertedintosharesintheCompanyinaccordancewiththetermsandconditionsofthe

SukukandwithouttheneedforanyfutureapprovalstotheconversionprocessfromthegeneralassemblyoftheCompanyortheregulatoryauthorities.

- Conversionprice:AED1perSukuk- Interestratepersukuk-0%- Conversionperiod:3monthsfromtheissuancedateendingon18February2019

TheSukukisnon-interestbearingandismandatorilyrequiredtobeconvertedintosharesintheCompanywithinthreemonthsfromtheissuancedate.Assuch,theGrouphasclassifiedtheSukukasequityintheconsolidatedfinancialstatements.

15 FINANCELEASES

2018 2017 AED’000 AED’000Amountspayableunderfinanceleases:Withinoneyear 10,020 10,420Between2-5years 72,592 83,722 ─────── ─────── 82,612 94,142Less:Financechargesapplicabletofutureyears (24,815) (34,061) ─────── ───────Presentvalueofleaseobligations 57,797 60,081 ═══════ ═══════

Withinoneyear 2,593 2,531Between2-5years 55,204 57,550 ─────── ─────── 57,797 60,081Less:Currentportion (2,593) (2,531) ─────── ───────Non-currentportion 55,204 57,550 ═══════ ═══════

On28November2017,theGroupenteredintoafinanceleaseagreementtosupporttheacquisitionofvesselsfromGST.TheliabilityispayableonamonthlybasisattherateofAED28,548perdayfortheperiodof5yearsandafinalrepaymentofAED44,718thousandon

29November2022.Duringtheyear,theGrouprepaidanamountofAED7,410thousand(2017:AED226thousand).

68



16 BANKBORROWINGS

2018 2017 AED’000 AED’000

CurrentBankborrowings 323,835 313,736 ═════════ ═════════Non-currentBankborrowings 78,695 61,713 ═════════ ═════════

Themovementsofbankborrowingsaresummarisedasbelow:

Term-loanI Term-loanII Term-loanIII Term-loanIV Total AED’000 AED’000 AED’000 AED’000 AED’000

Balanceat1January2018 305,385 70,064 - - 375,449Add:availedduringtheyear - - 30,000 59,377 89,377Less:repaidduringtheyear (51,704) (8,351) (2,241) - (62,296)──────────────────────────── ───────Balanceat31December2018 253,681 61,713 27,759 59,377 402,530

Less:currentportion (253,681) (8,351) (2,426) (59,377) (323,835)──────────────────────────── ───────Non-currentportion - 53,362 25,333 - 78,695════════════════════════════ ═══════Averagenominalinterestrate 2.86% 5.87% 6.08% 5.67% 5.12%════════════════════════════ ═══════

Themovementsofbankborrowingsaresummarisedasbelow:

Term-loanI Term-loanII Term-loanIII Term-loanIV Total AED’000 AED’000 AED’000 AED’000 AED’000

Balanceat1January2017 351,132 - - - 351,132Add:availedduringtheyear - 74,239 - - 74,239Less:repaidduringtheyear (45,747) (4,175) - - (49,922)──────────────────────────── ───────Balanceat31December2017 305,385 70,064 - - 375,449

Less:currentportion (305,385) (8,351) - - (313,736)──────────────────────────── ───────Non-currentportion - 61,713 - - 61,713════════════════════════════ ═══════Averagenominalinterestrate 1.89% 5.5% - - 3.70%════════════════════════════ ═══════

TermloanITheterm-loanofAED676,331thousandwasavailedbytheGrouptoacquirechemicaltankerscostingAED795,684thousand.ThisloancarriesfinancecostatLIBORplus0.7%perannumandispayablein39quarterlyinstalmentscommencingfrom1August2008andafinalpaymentofAED279,874thousandby31March2019.ArepaymentofAED51,704thousandwasmadeduringtheyear(2017:AED45,747thousand).

TermloanIITermloanofAED 74,238thousand(netofarrangementfees)wasavailedtothesupportacquisitionofchemicaltankersfromGST.ThisloancarriesinterestatEIBORplus3.5%perannumandispayablein20quarterlyinstalmentscommencingfrom21September2017andafinalpaymentofAED 32,500thousandon21March2023.ArepaymentofAED8,351thousandwasmadeduringtheyear(2017:AED4,175thousand).

69

Anuual Report 2018



16 BANKBORROWINGS(continued)

TermloanIII

TermloanofAED 30,000thousandwasavailedbytheGrouptosupportacquisitionandconversionofanoilstimulationvessel.This

loancarriesinterestatEIBORplus3.5%perannumandispayablein27equalquarterlyinstalmentscommencingfrom7December

2018withfinalpaymenton7June2025.ArepaymentofAED2,241thousandwasmadeduringtheyear.

TermloanIV

TermloanofAED 59,377thousand(netofarrangementfees)wasavailedtothesupportacquisitionoflivestockvessels.Thisloan

carriesinterestatEIBORplus3.0%perannumandispayablein16quarterlyinstalmentscommencingfrom29May2019withfinal

payment29November2023.

TermloansI,II,IIIandIVabovearecoveredbyvariousformsandcombinationsofsecuritywhichinclude:

• assignmentofrelatedvesselsmortgage;

• pledgeofsharesofsubsidiariesowningthesevessels;and

• corporateguaranteebytheparentcompany,intermediateparentand/orassociatedcompanies.

Thesignificantcovenantsfortheabovetermloansincludethefollowing:

• thecurrentassetsatalltimesexceedthecurrentliabilities;

• maintainatalltimesacashandcashequivalentsbalanceofoveracertainpercentageofthenetdebt;

• ensurethattheconsolidatedmarketadjustedequityisoveracertainpercentageoftheconsolidatedtotalmarketadjusted

assets;and

• ensurethattheaggregatefreemarketvalueofthevesselsisoveracertainpercentageofthenetdebt

Asat31December2018,theGroupremainedintechnicalbreachofspecifiedcovenantswithitslendersfortermloanIandIV.Such

breachhasrenderedtheloanstobetechnicallypayableondemandandassuch,itisclassifiedascurrentat31December2018.TheGroup’s

managementareindiscussionswiththelenderstoregularisetheloananddonotbelievethattheseloanswillbecalledbythelenders.

17 PROVISIONFOREMPLOYEES’ENDOFSERVICEBENEFITS

2018 2017

AED’000 AED’000

Balanceat1January 1,480 1,830

Chargefortheyear(Note23) 390 439

Paymentsduringtheyear (230) (789)

───────── ─────────

Balanceat31December 1,640 1,480

═════════ ═════════

In accordancewith the provisions of IAS19,management has carried out an exercise to assess the present value of theGroup’s

obligationsat31December2018and2017,usingtheprojectedunitcreditmethod,inrespectofemployees’endofservicebenefits

payableundertheUAELabourLaw.Underthismethod,anassessmenthasbeenmadeofanemployee’sexpectedservicelifewiththe

Groupandtheexpectedbasicsalaryatthedateofleavingtheservice.Managementhasassumedaverageincrement/promotioncosts

of5%(2017:5%).Theexpectedliabilityatthedateofleavingtheservicehasbeendiscountedtoitsnetpresentvalueusingadiscount

rateof2.54%(2017:2.54%).Thepresentvaluesoftheobligationsat31December2018and2017arenotmateriallydifferentfrom

theprovisioncomputedinaccordancewiththeUAELabourLaw.

70



18 TRADEANDOTHERPAYABLES

2018 2017 AED’000 AED’000

Non-currentProvisionsandotherpayables - 81,008

CurrentTradepayables 37,141 12,768Dividendpayable 10,600 10,638Advancefromcustomers 7,138 2,199Considerationpayableonacquisitionofabusiness(Note7.1) 20,000 -Interestpayableonborrowings 3,491 6,972Taxaccrual 13,220 2,263Otherloans - 9,150Dry-dockingrelatedaccruals 9,728 -Provisionsandotherpayables 28,484 9,560 ───────── ───────── 129,802 53,550 ───────── ───────── 129,802 134,558 ═════════ ═════════

Provisionsandotherpayablesasat31December2017amountingtoAED81,008thousandrelatedtoclaims,unfavourablearbitrationawards,andothercontingencieshasbeenreclassifiedas“currentliability”whereinAED 61,430thousandwassettledduringtheyear.TheGroupwasabletoderecogniseliabilitiestotallingAED8,727thousandduringtheyearended31December2018(2017:AED31,673thousand)whichisincludedwithin‘Liabilitiesnolongerrequiredwrittenback’intheconsolidatedstatementofcomprehensiveincome.

19 RELATEDPARTYTRANSACTIONSANDBALANCES

Relatedpartiesincludethemajorshareholders,directors,keymanagementpersonneloftheGroup,andtheirrelatedentitiesthathascontrol,jointcontrolorsignificantinfluenceovertheGroup.PricingpoliciesandtermsofthesetransactionsareapprovedbytheGroup’smanagement.Relatedpartytransactions:Duringtheyear,theGroupenteredintothefollowingsignificanttransactionswithrelatedpartiesintheordinarycourseofbusinessatmutuallyagreedtermsandconditions:

2018 2017 AED’000 AED’000

Financeincome-duefromarelatedparty - 1,202 ═════════ ═════════

Purchaseofvessels,propertyandequipment - 262,681 ═════════ ═════════

RelatedpartybalancesTheoutstandingbalancesofamountsduefrom/torelatedpartiesaregivenbelow:

2018 2017 AED’000 AED’000

CurrentGulfStoltTankersDMCCO(Jointventure)(ii) 1,017 3,371 ═════════ ═════════

Fortheyearended31December2018,theGrouphasnotrecordedanyimpairmentofreceivablesrelatingtoamountsowedbyrelated

parties(2017:Nil).

71

Anuual Report 2018



19 RELATEDPARTYTRANSACTIONSANDBALANCES(continued)

Keymanagementremuneration

2018 2017

AED’000 AED’000

Salaries,benefits,endofservicebenefitsanddirectors’fees 6,294 5,801

═════════ ═════════

Endofservicebenefits 74 76

═════════ ═════════

ThekeymanagementremunerationexcludesexpensesreimbursedamountingtoAED 169thousand(2017: AED 283thousand).

20 OPERATINGREVENUE

2018 2017

AED’000 AED’000

Vesselchartering 132,192 120,535

Shippingservices 13,563 11,296

Marineproductssalesanddistribution 407 2,475

Technicalservices 549 2,746

Shipmanagement 366 875

───────── ─────────

147,077 137,927

═════════ ═════════

21 OPERATINGCOSTS

2018 2017

AED’000 AED’000

Vesselchartering:

Shiprunning-vessels 60,571 33,196

Shiprunning–crewboats 3,821 4,326

Vesseldepreciation(excludingcrewboats) 45,374 35,603

Amortisationofdrydockingcosts 7,169 3,771

Shiprepair 1,250 760

Shippingservices:

Operatingcosts 9,848 7,505

Marineproductssalesanddistribution 210 2,032

Technicalservices 158 1,773

───────── ─────────

128,401 88,966

═════════ ═════════

72



22 GENERALANDADMINISTRATIVEEXPENSES

2018 2017 AED’000 AED’000

Staffcosts(Note23) 17,780 17,209Professionalfees 14,112 594Foreignexchangeloss 4,210 500Otheradministrativeexpenses 7,762 7,727 ───────── ───────── 43,864 26,030 ═════════ ═════════

TheGroupdidnotmakeanysocialcontributionsduringtheyearended31December2018(2017:Nil).

23 STAFFCOSTS

2018 2017 AED’000 AED’000

Salariesandwages 13,757 13,569Employees’endofservicebenefits(Note17) 390 439Otherbenefits 3,633 3,201 ───────── ───────── 17,780 17,209 ═════════ ═════════

24 EARNINGSPERSHARE

2018 2017

(Loss)/Profitfortheyear(AED’000) (40,116) 40,730 ═════════ ═════════

Numberofshares(Note12) 919,209,250 551,666,666 ═════════ ═════════

Basicearningspershare AED(0.047) AED0.074 ═════════ ═════════

Dilutedearningspershare AED(0.046) AED0.074 ═════════ ═════════

BasicearningspershareiscalculatedbydividingtheprofitattributabletoownersoftheGroupbytheweightedaveragenumberofordinarysharesinissue.On18November2018,theGroupissued100,000,000Islamicconvertiblebondswhichhaveanimpactondilutedearningspershare.

25 FINANCECOSTS

2018 2017 AED’000 AED’000

Bankborrowings 21,422 10,156Otherloans 770 1,999Bankcharges 101 68 ───────── ───────── 22,293 12,223

═════════ ═════════

73

Anuual Report 2018



26 OPERATINGLEASESASALESSOR

TheGroup leases itsmarine vessels under operating leases (time charters).The lease rental is usuallynegotiated to reflectmarketrentalsuponenteringinto/renewalofthecharter.Futureminimumleaserentalsreceivableunderthenon-cancellableoperatingleases(excludingthoseownedbythejointventure)areasfollows:

2018 2017 AED’000 AED’000

Notlaterthanoneyear 106,578 98,541Betweenoneyearandfiveyears 395,495 390,448Beyondfiveyears 6,880 81,089 ───────── ───────── 508,953 570,078 ═════════ ═════════

27 FINANCIALINSTRUMENTSBYCATEGORY

2018 2017 AED’000 AED’000

FinancialassetsLoansandreceivablesTradeandotherreceivables(excludingadvancetosuppliersandprepayments) 56,318 20,782Duefromarelatedparty 1,017 3,371Cashandbankbalances 34,279 38,673 ───────── ───────── 91,614 62,826 ═════════ ═════════

FinancialliabilitiesOtherfinancialliabilitiesTradeandotherpayables(excludingadvancefromcustomersanddividendpayable) 112,064 121,573Bankborrowings 402,530 435,529 ───────── ───────── 514,594 557,102 ═════════ ═════════

28 COMMITMENTS

(a) Capital expenditure commitment

ThecapitalexpenditurecommitmentofGroupamountedtoAED4,026thousand(2017:Nil).

(b) Operatingleasecommitments

Thecommitmentswithrespecttonon-cancellableoperatingleasesisasfollows:

2018 2017 AED’000 AED’000

Notlaterthan1year 1,070 1,076Laterthanoneyearandnolaterthan5years 2,580 3,901 ───────── ───────── 3,650 4,977 ═════════ ═════════

74



29 GUARANTEES

2018 2017

AED’000 AED’000

Bankguarantees 105 300

═════════ ═════════

TheGrouphasbankguaranteesarisingintheordinarycourseofbusinessfromwhichitisanticipatedthatnomaterialliabilitieswill

arise.

30 DIVIDEND

Thereisnodividendproposedfor2018(2017:AED Nil).

31 CONTINGENTLIABILITIES

Legislation and regulations regarding legal ownership, taxation and foreign currency transactions are constantly evolving in a

numberofterritoriesinwhichtheGroupoperates.Thevariouslegislationandregistrationsarenotalwaysclearlywrittenandtheir

interpretationissubjecttotheopinionsofthelocalandnationalauthorities.Instancesofinconsistentopinionsbetweenlocaland

nationalauthoritiesarenotunusual.

TheGrouppolicyistoaccruea loss intheaccountingperiodinwhichsuchloss isdeemedprobableandtheamountisreasonably

determinable(seenote18).

TheGroupoperationsandfinancialpositionwillcontinuetobeaffectedbypoliticaldevelopmentsincludingtheapplicationofexisting

andfuturelegislationandregulations.TheGroupissatisfiedthatthesecontingencies,asrelatedtoitsoperations,arenotanymore

significantthanthoseofsimilarenterprisesoperatinginitsindustryandterritories.

32 SUBSEQUENTEVENT

On18February2019, theCompany increased its authorised capital fromAED919,209 thousand toAED1,019,209 thousand.

Further,theSukukwasconvertedinto100,000,000sharesintheCompany.

33 OTHERMATTER

Asof31December2018,theGroupdoesnothaveanyinvestmentsinorotherexposuretoAbraajHoldings,itssubsidiariesoranyof

thefundsmanagedbyAbraajHoldingsoranyofitssubsidiaries.

www.gulfnav.comwww.gulfnav.com

Head Office

39th Floor, API Trio Towers, Al Barsha 1, Dubai, U.A.E.

Tel: +971 4 4270104

Fax: +971 4 4270102

P.O. Box: 49651

[email protected]

Fujairah

Tel: +971 9 222 8991

Fax: +971 9 222 8992

P.O. Box: 3829

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Khorfakan

Tel: +971 9 238 5713

Fax: +971 9 238 3032

P.O. Box: 10316

[email protected]

[email protected]

Saudi Arabia

Tel: +966 1 472 1066

Fax: +966 1472 1060

P.O. Box: 27497, Riyadh,

Saudi Arabia

[email protected]

Annual Report

2018

annual report 2018 - gulf navigation

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