TIDMADES
RNS Number : 6548Z
ADES International Holding PLC
22 September 2020
For the purpose of the Transparency Directive the Home Member
state of the issuer is the United Kingdom.
ADES International Holding PLC results for the six-month period
ended 30 June 2020
(London & Dubai, 22 September 2020) ADES International
Holding PLC ("ADES" or "the Group") , a leading oil & gas
drilling and production services provider in the Middle East and
North Africa (MENA), announces its results for the six-month period
ended 30 June 2020 .
Summary of Financials
(US$ '000) H1 2020 H1 2019 % change
------------------------------------- -------- --------- ---------
Revenue 249,325 219,940 13%
------------------------------------- -------- --------- ---------
EBITDA 93,324 90,064 3.6%
------------------------------------- -------- --------- ---------
EBITDA Margin 37.4% 40.9% -3.5 pts
------------------------------------- -------- --------- ---------
Normalised EBITDA(1) 99,906 90,064 11%
------------------------------------- -------- --------- ---------
Normalised EBITDA Margin 40.1% 40.9% -0.8 pts
------------------------------------- -------- --------- ---------
Net Profit 15,469 3,235(2) 378%
------------------------------------- -------- --------- ---------
Net Profit Margin 6.0% 1.0% 5 pts
------------------------------------- -------- --------- ---------
Normalised Net Profit(3) 25,989 32,844 -21%
------------------------------------- -------- --------- ---------
Normalised Net Profit Margin 10.4% 14.9% -4.5 pts
------------------------------------- -------- --------- ---------
Weighted Average No. of Shares 43,223 43,794 -1.3%
------------------------------------- -------- --------- ---------
Normalised Earnings per Share (US$) 0.60 0.75 -20%
------------------------------------- -------- --------- ---------
Reported Earnings per Share (US$) 0.36 0.07 384%
------------------------------------- -------- --------- ---------
Net Debt 621 601 3.3%
------------------------------------- -------- --------- ---------
Key Financial Highlights
-- Revenue grew by 13.4% to US$ 249.3 million in H1 2020 from
US$ 219.9 million in the same period of 2019, demonstrating the
Group's resilience in the face of exceptional challenges posed by
the outbreak of COVID-19 and fluctuating oil prices.
-- EBITDA increased by 3.6% to US$ 93.3 million in H1 2020 from
US$ 90.1 million in H1 2019. EBITDA margin stood at 37.4% versus
40.9% in H1 2019. The EBITDA margin in H1 2020 was impacted by
one-off charges taken to ensure continued safe operation of the
crews across the Group's rigs during the ongoing COVID-19 crisis,
in addition to non-recurring integration costs.
-- Normalised EBITDA(1) , which excludes one-off charges, was up
11.0% year-on-year to US$ 99.9 million in H1 2020, with a margin of
40.1%.
-- Backlog as at 30 June 2020 of US$ 1.2 billion, compared to
US$ 1.3 billion at year-end 2019, reflecting delivery of c.US$ 250
million and replenishment with three new contracts worth US$ 140
million.
-- Net profit of US$ 15.5 million in H1 2020 compared to US$ 3.2
million in the same period during 2019, due to a 40% year-on-year
reduction in the reported interest expense.
-- Normalised net profit(3) stood at US$ 26.0 million in H1
2020, compared to US$ 32.8 million for the same period in 2019. The
decline was due to a higher depreciation expense due to the Group's
increased asset base. Additionally, the Group booked higher finance
charges in H1 2020 on a normalised basis as a consequence of the
successful issuance of the Group's five-year bond of US$ 325
million in late April 2019 and utilisation of the US$ 80 million
NCB facility during H2 2019, both of which provided additional
liquidity, headroom and financial flexibility for the business.
-- Net operating cashflow recorded a strong 66% y-o-y growth to
US$ 102 million in H1 2020, which was reflected on the Group's free
cash flow to firm FCFF (pre debt service) having stood at an inflow
of US$ 37 million compared to an outflow of US$ 115 million in the
same period last year. The improvement follows a normalisation of
capital expenditure post acquisitions and the significantly
enhanced working capital dynamics year over year, specifically
following a temporary increase at the end of Q1 2020 as the Group
took proactive efforts to secure essential supplies and inventory
in order to mitigate any potential disruptions related to COVID-19.
Additionally, the Group saw improved collection periods,
particularly in KSA and Kuwait, coupled with tighter cash
preservation policies.
-- Cash on hand of US$ 125.6 million and available undrawn
banking facilities of approximately US$ 90 million as at 30 June
2020, continuing to provide strong liquidity and headroom.
-- Net Debt stood at US$ 621 million as of 30 June 2020 versus
US$ 640.3 million as of 31 March 2020. The improvement is in line
with the guidance stated in the Q1 2020 trading update (in June)
where management had anticipated a normalisation of working capital
requirements.
-- Net Debt to LTM EBITDA(4) stood at 3.16x in H1 2020 ,
providing headroom against the current covenant of 4.0x.
-- B+ credit rating reaffirmed by S&P and Fitch Ratings during the first half of 2020.
-- Utilisation rates softened from 95% to 92% in H1 2020 despite
the year-on-year improvement recorded in Q1 2020 as market
conditions impacted Q2. Expectation for 2H 2020 to slightly lag
behind the first half of the year.
-- Contract renewals and extensions for US$ 140 million in KSA ,
including a five-year contract renewal for ADMARINE 262, a one-year
extension for ADMARINE 261 and a six-month contract extension for
ADES 40.
-- Launch of a second share repurchase program emphasising the
Board's confidence in the Company's prospect. Thus far, the Company
has purchased 2.46 million treasury shares worth approximately US$
24.2 million as of 31 August 2020, in turn channelling cash back to
shareholders.
-- ADES achieved over 6.75 million-man hours in H1 2020 with a
Recordable Injury Frequency Rate ("RIFR") of 0.41(5) , below the
IADC worldwide standard rate as at 30 June 2020 of 0.52.
(1) Normalised EBITDA is calculated as EBITDA excluding
non-recurring charges related to: a) non-recurring staff cost
related to crew overstay due to COVID 19; b) non-recurring
integration program costs.
2 Refer to the financial statement as 30 June 2020, disclosure 3 Business combination.
3 Normalised Net Profit is calculated as net profit before
non-controlling interest after excluding non-recurring charges
from: a) non-recurring staff cost related to crew overstay due to
COVID 19; b) non-recurring integration program costs; c) one off
finance charges related to loan fees and written off prepaid
transaction costs; d) accounting adjustments related to IFRS 3
(Business Combinations) and a one-off bargain purchase gain; e)
non-cash, equity-settled share-based payment compensation from the
parent company; f) non-cash fair-value adjustments under financial
instruments; and g) non-recurring transactions.
4 LTM EBITDA (Last Twelve Months EBITDA) is calculated as
operating profit for the period before depreciation and
amortisation, employee benefit provision and other provisions and
impairment of assets under construction for the past twelve
consecutive months.
5 Per 200,000 working hours
Key Operational Highlights
-- The Group's proactive response at the onset of the COVID-19
crisis saw the roll out of robust health and safety protocols and
business continuity plans to mitigate risks posed by the pandemic.
These protocols have proven successful in allowing the Group's
operations to continue without notable interruptions across all
four of its countries of operation.
-- With the vast majority of the Group's rigs staffed by in
country employees , the restrictions on mobility, which impacted
businesses globally, have not posed significant challenges to
ADES's operations. The Group also benefits from the essential role
of the oil & gas industry for the MENA region, which is seen as
an important factor in helping to address some of the restrictive
measures imposed by governments across the region on other
industries. Additionally, the MENA region continues to produce a
significant proportion of global supply at low production costs per
barrel.
-- The Group's continued focus on business sustainability over
the years, allowed ADES to enter 2020 well positioned to weather
the current challenging conditions faced up to this point as well
as any future difficulties which may present. Today ADES's business
has been largely shielded from the ongoing turmoil.
Current Trading and Outlook
-- During the first six months of the year, ADES continued to
make good progress with its Integration Project and is now
delivering normalised EBITDA margins broadly in line with the
Group's average at the majority of the Group's acquired rigs.
Furthermore, the Group was agile in implementing cost-saving
initiatives, in its effort to counter the effect posed by the
pandemic and the current market dynamics.
-- Despite the challenges posed by the ongoing COVID-19 pandemic
and the oil prices fluctuations, the Group's operations have not
seen a material impact with the exception of the delay of two new
contracts in Kuwait (previously announced on 9 December 2019) and
temporary contract suspensions for few of the Group's land rigs due
to the slowdown of activities in KSA and Algeria.
-- The contract suspensions helped our client control their
costs while at the same time generally preserving ADES's backlog
with the suspension period automatically extending the contracted
tenor. More importantly, we were able to almost eliminate our costs
for these rigs, which in addition to the low-cost nature of
stacking onshore rigs has allowed the Group to broadly maintain
margins. This flexibility has further strengthened our client
partnerships, leaving them satisfied with quality assets on
temporary hold and ensuring our ability to a swift return to
production without the need for retendering.
-- In the second half of 2020, the Group expects to continue
delivering resilient operational and financial results but lagging
behind figures recorded in the first six months of the year.
Overall, as previously highlighted, management expects full-year
results broadly in line with the Group's 2019 performance
underpinned by the current backlog and activity levels.
Commenting on the results, Dr. Mohamed Farouk, Chief Executive
Officer of ADES International said:
"The Group's first half results highlight the relative
resilience of ADES's markets and the strength of our business model
in very challenging market conditions. This in part reflects the
Group's successful transformation over the last three years from a
local, offshore-focused driller in Egypt, to a regional champion
with a significant asset base across both the on- and offshore
segments. Over the same period ADES has significantly grown revenue
and delivered a threefold increase in EBITDA, strengthening its
financial position. I am proud to say that regardless of the
ongoing global uncertainty, the whole team has demonstrated
tremendous commitment, and remarkable agility which enabled us to
continue working in line with our strategy.
Our results were supported by a strong first quarter performance
through April, before seeing an impact caused by oil market
volatility and COVID-19 related disruptions towards the end of the
second quarter. Nevertheless, we managed to broadly maintain our
normalised margins thanks to our cost-saving initiatives that
helped counter the effect posed by the pandemic and the current
market dynamics.
In the medium term we see good prospects for our services given
our geographical exposure and cost-effective, well targeted asset
base. We do expect an oil market recovery through 2021 as the
global economy slowly recovers and markets return to an
equilibrium.
Having successfully navigated the most critical time in the
global crisis, the Board is confident in ADES's ability to continue
to prosper with strong long-term sustainable business."
Conference Call
ADES's management team will host an analyst and investor call
for the 1H 2020 Results today at 14:00 UK. For conference call
details, please email ades@instinctif.com .
ADES International Holding
Hussein Badawy
Investor Relations Officer
ir@adesgroup.com
+2 (02) 38525354
About ADES International Holding (ADES)
ADES International Holding extends oil and gas drilling and
production services through its subsidiaries and is a leading
service provider in the Middle East and North Africa, offering
onshore and offshore contract drilling as well as workover and
production services. Its c.4,000 employees serve clients including
major national oil companies ("NOCs") such as Saudi Aramco and
Kuwait Oil Company as well as joint ventures of NOCs with global
majors including BP and Eni. While maintaining a superior health,
safety and environmental record, the Group currently has a fleet of
thirty-six onshore drilling rigs, thirteen jack-up offshore
drilling rigs, a jack-up barge, and a mobile offshore production
unit ("MOPU"), which includes a floating storage and offloading
unit. For more information, visit investors.adihgroup.com .
Shareholder Information
LSE: ADES INT.HDG
Bloomberg: ADES:LN
Listed: May 2017
Shares Outstanding: 43.8 million
Forward-Looking Statements
This communication contains certain forward-looking statements.
A forward-looking statement is any statement that does not relate
to historical facts and events, and can be identified by the use of
such words and phrases as "according to estimates", "aims",
"anticipates", "assumes", "believes", "could", "estimates",
"expects", "forecasts", "intends", "is of the opinion", "may",
"plans", "potential", "predicts", "projects", "should", "to the
knowledge of", "will", "would" or, in each case their negatives or
other similar expressions, which are intended to identify a
statement as forward-looking. This applies, in particular, to
statements containing information on future financial results,
plans, or expectations regarding business and management, future
growth or profitability and general economic and regulatory
conditions and other matters affecting the Group.
Forward-looking statements reflect the current views of the
Group's management ("Management") on future events, which are based
on the assumptions of the Management and involve known and unknown
risks, uncertainties and other factors that may cause the Group's
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by these forward-looking statements. The
occurrence or non-occurrence of an assumption could cause the
Group's actual financial condition and results of operations to
differ materially from, or fail to meet expectations expressed or
implied by, such forward-looking statements.
The Group's business is subject to a number of risks and
uncertainties that could also cause a forward-looking statement,
estimate or prediction to differ materially from those expressed or
implied by the forward-looking statements contained in this
prospectus. The information, opinions and forward-looking
statements contained in this communication speak only as at its
date and are subject to change without notice. The Group does not
undertake any obligation to review, update, confirm or to release
publicly any revisions to any forward-looking statements to reflect
events that occur or circumstances that arise in relation to the
content of this communication.
Operational & Financial Review
Backlog
The Group's backlog recorded US$ 1.2 billion as at 30 June 2020
compared to US $1.3 billion at 31 December 2019, as the adverse
market conditions due to COVID-19 and oil price volatility
presented for reduced tendering and renewal activity. Nonetheless
ADES added c. US$ 140 million of backlog during H1 2020.
In H1 2020, in the KSA, ADMARINE 262 secured a contract renewal
for an additional five years at a higher day rate, while for
ADMARINE 261 the contract was extended for an additional year at
the same day rate. Additionally, the Group also secured a six-month
contract extension for ADES 40 which is also located in KSA.
Revenue
Revenue grew 13.4% year-on-year in H1 2020 representing Group's
ability to promptly adapt to the difficult operational conditions,
combined with the resilience of its business model which saw ADES
record only a marginal decline in utilisation rates to 92% from 95%
in H1 2019. The decline is attributable to a slowdown of activities
in the second quarter of the year.
Revenue by Country
(US$ '000) H1 2020 H1 2019 % change
------------- --------- --------- ---------
KSA 135,090 121,008 11.6%
------------- --------- --------- ---------
Kuwait 65,737 39,057 68.3%
------------- --------- --------- ---------
Egypt 39,167 43,571 -10.1%
------------- --------- --------- ---------
Algeria 9,331 16,304 -42.8%
------------- --------- --------- ---------
Total 249,325 219,940 13.4%
------------- --------- --------- ---------
Revenue Contribution by Country
H1 2020 H1 2019 % change
--------------------------------- -------- -------- ---------
KSA 54% 55% -1 pts
--------------------------------- -------- -------- ---------
Kuwait 26% 18% 8 pts
--------------------------------- -------- -------- ---------
Egypt 16% 20% -4 pts
--------------------------------- -------- -------- ---------
Algeria 4% 7% -3 pts
--------------------------------- -------- -------- ---------
Backlog by Country
H1 2020 H1 2019 % change
-------------------- -------- -------- ---------
KSA 51% 50% +1 pts
-------------------- -------- -------- ---------
Egypt 8% 10% -2 pts
-------------------- -------- -------- ---------
Algeria 2% 2% -
-------------------- -------- -------- ---------
Kuwait 39% 38% +1 pts
-------------------- -------- -------- ---------
The Group's revenue in KSA rose 11.6% year-on-year to US$ 135.1
million in the first half of 2020. While fluctuations in the oil
price and the ongoing COVID-19 crisis impacted operations across
the region, the long-term planning horizons and lower breakeven
point of ADES's main partner in KSA, Saudi Aramco, allowed the
Company to continue operating without major in-country disruptions.
Specifically, growth was driven by the new build rigs ADES 13 and
ADES 14 that were not operational in H1 2019. Additionally,
operations in KSA recorded a modest improvement in average
utilisation rates of offshore rigs, with two rigs having undergone
upgrade projects for approximately 30 days in H1 2019 versus full
operation in the current period.
In Kuwait, the continued ramp up of operations in the country
saw first half revenue expand 68.3% year-on-year to US$ 65.7
million. As such, the country's contribution to consolidated
revenue increased eight percentage points to 26% in H1 2020.
Revenue growth in Kuwait came as the number of operating rigs
increased year-on-year.
Revenue from Egypt of US$ 39.2 million was down 10.1%
year-on-year. The country's contribution to total revenues stood at
16% in H1 2020. Operations in the country were impacted by oil
price volatility and generally adverse market conditions.
Algeria revenue declined to US$ 9.3 million in H1 2020, down
42.8% versus the same period of last year. The decline is largely
attributable to lower utilisation rates given a lower oil price.
Algeria is our most exposed end market to oil price volatility and
as a result of the weak first half performance Algeria's
contribution to consolidated revenue declined to 4% compared to 7%
in the first half of 2019.
Assets by Country & Type as at 30 June 2020
Onshore Rig Offshore Rig Jack-up Barge MOPU
-------------- ------------ ------------- -------------- ----------------------------
KSA 15 6 - -
-------------- ------------ ------------- -------------- ----------------------------
Kuwait 12 - -
-------------- ------------ ------------- -------------- ----------------------------
Egypt 1 7 1 1
-------------- ------------ ------------- -------------- ----------------------------
Algeria 8 - - -
-------------- ------------ ------------- -------------- ----------------------------
Other - - - -
-------------- ------------ ------------- -------------- ----------------------------
Total Assets 36 13 1 1
-------------- ------------ ------------- -------------- ----------------------------
Revenue by Segment
(US$ '000) H1 2020 H1 2019 % change
------------------------------ --------- --------- ---------
Onshore Drilling & Workover 134,186 109,820 22.2%
------------------------------ --------- --------- ---------
Offshore Drilling & Workover 88,896 85,364 4.1%
------------------------------ --------- --------- ---------
MOPU 12,899 12,810 0.7%
------------------------------ --------- --------- ---------
Jack Up Barge & Projects 1,144 6,123 -81.3%
------------------------------ --------- --------- ---------
Others 12,200 5,823 109.5%
------------------------------ --------- --------- ---------
Total 249,325 219,940 13.4%
------------------------------ --------- --------- ---------
Onshore Drilling & Workover (54% of revenue in H1 2020)
ADES's onshore fleet currently includes 36 rigs located in KSA,
Kuwait, Algeria and one in Egypt. The Company's onshore
capabilities have been significantly expanded in recent years
through the acquisition of 31 onshore rigs during 2018 and 2019,
and in H1 2020 made up more than half of the Group's revenue at
54%. H1 2020 revenue generated by ADES's Onshore Drilling &
Workover operations grew 22.2% year-on-year to US$ 134.2 million.
Onshore growth was driven by contracts for ADES 13 and ADES 14 in
KSA as well as the increase in the number of operating rigs in
Kuwait year on year.
Offshore Drilling & Workover (36% of revenue in H1 2020)
We currently conduct our offshore drilling and workover services
in Egypt and KSA, focusing on shallow/ultra-shallow water and
non-harsh environments.
Offshore Drilling & Workover revenue saw a 4.1% year-on-year
increase to US$ 88.9 million in H1 2020, up from US$ 85.4 million
in the same period of 2019. The segment's contribution to the
Group's consolidated revenues declined three percentage points to
36%, reflecting the rapid growth in contribution from the onshore
segment. Revenue growth was driven by a marginal improvement in
offshore utilisation rates in KSA, with two rigs having undergone
upgrade projects during H1 2019.
MOPU, Jack Up Barge & projects (5% of revenue in H1
2020)
ADES's MOPU services were first introduced in February 2016 with
Admarine I, a converted and modified jack-up rig equipped with
production and process facilities and a Floating Storage and
Offloading (FSO) unit. Admarine I, located in Egypt, is currently
under contract with Petrozenima to process, store and offload crude
oil.
MOPU services generated revenues of US$ 12.9 million in H1 2020,
largely unchanged from the same six months of 2019.
The Group's jack-up barge and projects generated US$ 1.1 million
in revenue for H1 2020 compared to US$ 6.1 million in H1 2019. The
decline reflects slower activity of projects in Egypt which
accounted for c.US$ 3.9 million of the lower revenue
year-on-year.
Others (5% of revenue in H1 2020)
Other revenue mainly includes catering , mobilization, the
rental of essential operating equipment that the client has not
supplied, and site preparation revenue. Other revenue recorded a
109.5% year-on-year increase to US$ 12.2 million in H1 2020 from
US$ 5.8 million in the same period of last year. The significant
increase is largely attributable to mobilization revenue
amortization for four rigs in H1 2020 as opposed to two rigs in H1
2019; and de-mobilization revenue for four rigs in Kuwait (out of
which two are being prepared for new contracts).
Operating Profit
Operating profit was US$ 57.5 million in H1 2020, remaining
largely flat compared to the US$ 57.9 million recorded in the same
period last year.
Normalised EBITDA - which excludes non-recurring staff costs
related to crew overstays due to COVID-19 (US$ 3.3 million) mainly
during Q2 2020 and non-recurring integration program costs (US$ 3.3
million) was up 11.0% year-on-year to US$ 99.9 million in H1 2020,
a margin of 40.1% versus 40.9% in H1 2019. The modest contraction
in margin reflects the mix effect of the growing contribution from
onshore drilling and workover activities in KSA and Kuwait.
Net Finance Charges
Reported finance charges stood at US$ 31.5 million in H1 2020,
down 40% year-on-year from the US$ 52.7 million in H1 2019. The
decline reflects the one-offs in H1 2019 related to the successful
issuance of the Group's five-year bond, loan fees and written-off
prepaid transaction costs.
Normalised net finance charges which exclude one-off costs
increased by 14% year-on-year versus US$ 27.6 million in H1 2019.
Higher finance charges reflect higher gross borrowings as
facilities were secured in order to provide an optimal capital
structure, with the required financial flexibility and liquidity.
The Group received finance income of US$ 0.5 million in H1 2020
compared to US$ 0.1 million in H1 2019.
Statutory and Normalised Net Profit
ADES reported a net profit of US$ 15.5 million in H1 2020, up
378% from the US$ 3.2 million recorded in H1 2019. Normalised net
profit was down by 21% at US $26.0 million, excluding the following
non-recurring charges:
-- non-cash, equity-settled share-based payment compensation
from the Parent Company of US$ 1.9 million;
-- non-cash fair-value adjustment loss under financial instruments of US$ 2.0 million;
-- one-off charges related to COVID-19 and non-recurring
integration program costs totalling US$ 6.6 million.
Balance Sheet
Assets
Total assets stood at US$ 1.45 billion as of 30 June 2020
compared to US$ 1.43 billion as of 31 December 2019, representing a
modest 1% increase. Net fixed assets were US$ 1.01 billion at H1
2020 compared to US$ 987 million at the 2019 year-end, driven by
the refurbishment and maintenance capital expenditure during the
period above depreciation .
Net accounts receivable stood at US$ 130.6 million as of 30 June
2020, flat compared to year-end 2019.
Cash and cash equivalents increased to US$ 125.6 million
compared to US$ 119.6 million at year-end 2019.
Liabilities
ADES' total liabilities stood at US$ 995.4 million as of 30 June
2020 compared to US$ 978.8 million as of 31 December 2019. The
Group's total interest-bearing loans, borrowings and financial
lease were US$ 747.1 million as of 30 June 2020, up from US$ 725.8
million at the end of 2019.
Net debt was US$ 621 million as of 30 June 2020, down from US$
640 million at the close of the previous quarter and higher than
the US$ 606 million as of 31 December 2019. The quarter-on-quarter
improvement in net debt reflects a normalisation of working capital
requirements following an increase in the first quarter of the year
as the Group took proactive efforts to secure essential supplies
and inventory in order to mitigate any potential disruptions
related to COVID-19.
Cash Flow
Cash Flow by Activity
(US$ '000) H1 2020 H1 2019 % change
-------------------------------------------- ---------- ---------- ---------
Net Cash Flow from Operating Activities 101,965 61,177 67%
-------------------------------------------- ---------- ---------- ---------
Net Cash Flow Used in Investing Activities ( 63,986) (176,759) -64%
-------------------------------------------- ---------- ---------- ---------
Net Cash Flow from Financing Activities (31,976) 24,661 n/a
-------------------------------------------- ---------- ---------- ---------
Cash Flow from Operating Activities
Cash flow from operating activities increased 67% year-on-year
to US$ 102 million in H1 2020 driven by improved operational
performance along with better working capital dynamics. The Group
saw improved collection periods, particularly in KSA and Kuwait,
coupled with tighter cash preservation policies.
Net Cash Flow Used in Investing Activities
Net cash flow used in investing activities declined 64%
year-on-year to US$ 64.0 million in H1 2020 compared to the US$
176.8 million in the same period last year. The decline reflects
the higher total spend in H1 2019 including the acquisition spend
for the Algerian and South Iraqi land rigs from Weatherford;
capital expenditure to build two new-build land rigs for KSA; and
spending to ongoing upgrades on ADES's rigs. Meanwhile, capital
expenditure in H1 2020 totalled US$ 64.4 million.
Net Cash Flow from Financing Activities
Net cash outflow from financing activities stood at US$ 32
million in H1 2020 compared to an inflow of US$ 24.7 million in the
same period last year. The change reflects repayments of US$ 46
million related to the Group's medium-term loans and other
revolving or working capital facilities; US$ 30.2 million in
interest payments; and US$ 14.3 million for the purchase of
treasury stock. The Group drew down on the remainder of its Alinma
facility totalling US$ 64.0 million during 2Q 2020 as part of our
capital structure optimisation efforts.
The Group has a total loan repayment of approximately US$ 40
million in H2 2020 which will be satisfied through existing cash
balances.
Principal Risks and Uncertainties
As any company, ADES is exposed to risks and uncertainties that
may adversely affect its performance. The Board and senior
management agree that the principal risks and uncertainties facing
the Group include political and economic situation in Egypt,
Algeria, Kuwait and KSA and the rest of the Middle East and North
Africa region, foreign currency supply and associated risks,
changes in regulation and regulatory actions, environmental and
occupational hazards, failure to maintain the Group's high quality
standards and accreditations, failure to retain or renew contracts
with clients, failure to recruit and retain skilled personnel and
senior management, pricing pressures and decreased business
activity in the oil and gas industry, among others.
Additionally, the continued spread of the global COVID-19
pandemic and the potential for a second wave across the Group's
geographies as well as uncertainty in commodity markets continues
to affect the global economic outlook and in turn activity in oil
markets. This may adversely impact future financial results,
earnings and cash flow for all businesses including ADES. The Group
is also exposed to specific risks posed by the COVID-19 pandemic,
including, but not limited to, risk of infection among its
employees, operational disruption in the case of infection on the
Group's rigs, supply-chain related risks and the ability to acquire
necessary materials and failure to mobilise crew due to travel
restrictions and lockdowns.
Going Concern
The Directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period of not less than 12 months from the date of this report.
Accordingly, the Directors continue to adopt the going concern
basis in preparing the condensed financial statements. The Group's
Financial Statements for the half year ended 30 June 2020 are
available on the Group's website at investors.adihgroup.com
Statement of Directors' Responsibilities
Each of the Directors confirms that, to the best of their
knowledge:
-- The preliminary financial information, which has been
prepared in accordance with International Financial Reporting
Standards (" IFRS "), give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group;
and
-- The preliminary announcement includes a fair summary of the
development and performance of the business and the position of the
Group.
After making enquiries, the Directors considered it appropriate
to adopt the going concern basis in preparing the consolidated
financial statements.
A list of current directors of the Company is maintained on the
Group's website at investors.adihgroup.com .
On behalf of the Board
Dr. Mohamed Farouk
Chief Executive Officer
Terms and Definitions
EBITDA - Operating profit for the year before depreciation and
amortisation, employee benefit provision and other provisions and
impairment of assets under construction.
Normalised EBITDA - EBITDA excluding non-recurring charges
related to: a) non-recurring staff cost related to crew overstay
due to COVID 19; and b) non-recurring integration program
costs.
LTM EBITDA (Last Twelve Months EBITDA) - operating profit for
the period before depreciation and amortisation, employee benefit
provision and other provisions and impairment of assets under
construction for the past twelve consecutive months.
Normalised Net profit - Net profit before non-controlling
interest after excluding non-recurring charges from: a)
non-recurring staff cost related to crew overstay due to COVID 19;
b) non-recurring integration program costs; c) one off finance
charges related to loan fees and written off prepaid transaction
costs; d) accounting adjustments related to IFRS 3 (Business
Combinations) and a one-off bargain purchase gain; e) non-cash,
equity-settled share-based payment compensation from the parent
company; f) non-cash fair-value adjustments under financial
instruments; and g) non-recurring transactions costs.
FCFF (pre debt service) - Free Cash Flow to Firm calculated as
cash flow from operations (after working capital changes) less
taxes paid, less CAPEX.
Backlog - means the total amount payable to the Group during the
remaining term of an existing contract plus any optional client
extension provided for in such contract, assuming the contracted
rig will operate (and thus receive an operating day rate) for all
calendar days both in the remaining term and in the optional
extension period.
GCC - Gulf Cooperation Council.
MENA - The Middle East and North Africa.
MOPU - Mobile Operating Production Unit.
Recordable Injury Frequency Rate (RIFR) - The number of
fatalities, lost time injuries, cases or substitute work and other
injuries requiring medical treatment by a medical professional per
200,000 working hours.
KSA -The Kingdom of Saudi Arabia.
Utilisation Rate - refers to our measure of the extent to which
our assets under contract and available in the operational area are
generating revenue under client contracts. We calculate our
utilisation rate for each rig by dividing Utilisation Days by
Potential Utilisation days under a contract. Utilisation rates are
principally dependent on our ability to maintain the relevant
equipment in working order and our ability to obtain replacement
and other spare parts. Because our measure of utilisation does not
include rigs that are stacked or being refurbished or mobilised,
our reported utilisation rate does not reflect the overall
utilisation of our fleet, only of our operational, contracted
rigs.
Gross Debt - Total interest-bearing loans and borrowings.
Net Debt - Total gross debt minus cash and cash equivalents.
ADES International Holding PLC
and its Subsidiaries
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
30 June 2020
REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS TO THE SHAREHOLDERS OF ADES INTERNATIONAL HOLDING PLC
AND ITS SUBSIDIARIES
Introduction
We have reviewed the accompanying interim condensed consolidated
statement of financial position of ADES International Holding plc
(the "Company") and its subsidiaries (the "Group") as of 30 June
2020 and the related interim condensed consolidated statements of
comprehensive income, changes in equity and cash flows for the
six-months period then ended, and explanatory notes. Management is
responsible for the preparation and presentation of these interim
condensed consolidated financial statements in accordance with
International Accounting Standard 34 Interim Financial Reporting
("IAS 34"). Our responsibility is to express a conclusion on these
interim condensed consolidated financial statements based on our
review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements 2410, "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity". A
review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying interim condensed
consolidated financial statements are not prepared, in all material
respects, in accordance with IAS 34.
For Ernst & Young
Signed by:
Anthony O'Sullivan
Partner
17 September 2020
Dubai, United Arab Emirates
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months period ended 30 June 2020 (Unaudited)
30 June 2019
US$ Notes 30 June 2020 (Restated*)
----------------------------------------- ------ --------------------------- ---------------------------
Revenue from contract with customers 5 249,325,240 219,940,465
Cost of revenue 6 (158,039,578) (128,857,424)
--------------------------- ---------------------------
GROSS PROFIT 91,285,662 91,083,041
General and administrative expenses 7 (26,573,446) (23,992,501)
End of service provision 20 (2,550,346) (1,745,191)
Share-based payments expense 22 (1,922,935) (7,470,824)
Inventory impairment provision 11 (220,331) -
Provision for impairment of trade
receivables and contract assets 12 (2,558,649) -
OPERATING PROFIT 57,459,955 57,874,525
Finance costs 8 (31,545,379) (52,676,090)
Finance income 10 481,305 123,982
Bargain purchase gain 3 - 11,877,674
Business acquisition transaction
costs 3 - (4,383,022)
Capital loss from assets disposal 14 (333,176) -
Other income - 378,203
Other taxes (237,098) (80,250)
Other expenses (2,311,347) (1,093,385)
Fair value loss on derivative financial
instrument 27 (2,014,982) (4,552,297)
PROFIT FOR THE PERIOD BEFORE INCOME
TAX 21,499,278 7,469,340
Income tax expense 9 (6,030,643) (4,234,025)
--------------------------- ---------------------------
PROFIT FOR THE PERIOD 15,468,635 3,235,315
OTHER COMPREHENSIVE INCOME - -
TOTAL COMPREHENSIVE INCOME 15,468,635 3,235,315
=========================== ===========================
Attributable to:
Equity holders of the Parent 13,998,082 2,205,550
Non-controlling interests 1,470,553 1,029,765
--------------------------- ---------------------------
15,468,635 3,235,315
=========================== ===========================
Earnings per share - basic and diluted
attributable to equity holders of
the Parent (US$ per share) 23 0.32 0.05
=========================== ===========================
OTHER COMPREHENSIVE INCOME
Other comprehensive income that may
be reclassified to
profit or loss in subsequent periods
(net of any tax)
Net loss on cash flow hedge 27 (2,810,994) -
--------------------------- ---------------------------
OTHER COMPREHENSIVE LOSS FOR THE (2,810,994) -
PERIOD, NET OF TAX
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD, NET OF TAX 12,657,641 3,235,315
=========================== ===========================
Attributable to:
Equity holders of the Parent 11,187,088 2,205,550
Non-controlling interests 1,470,553 1,029,765
--------------------------- ---------------------------
12,657,641 3,235,315
=========================== ===========================
*Comparative information has been adjusted to reflect the IFRS 3
Business combination measurement period adjustments, refer to note
3.
The accompanying notes 1 to 30 form an integral part of these
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 June 2020 (Unaudited)
31 December
US$ Notes 30 June 2020 2019
--------------------------------------- ------ -------------- --------------
ASSETS
Non-current assets
Property, plant and equipment 14 1,006,663,328 987,216,314
Right of use assets 17 21,777,732 23,422,290
Intangible assets 15 364,346 347,304
Investments in an associate and a
joint venture 3,968,008 4,140,576
Trade receivables 12 16,754,965 38,947,290
Other non-current assets 1,130,559 2,858,310
-------------- --------------
Total non-current assets 1,050,658,938 1,056,932,084
-------------- --------------
Current assets
Inventories 11 47,984,109 44,820,164
Trade receivables 12 113,813,826 91,780,792
Contract assets 12 34,234,563 41,541,310
Due from related parties 24 4,080,399 4,740,918
Prepayments and other receivables 13 69,207,724 72,150,555
Bank balances and cash 10 125,604,127 119,601,159
-------------- --------------
Total current assets 394,924,748 374,634,898
-------------- --------------
Total assets 1,445,583,686 1,431,566,982
============== ==============
EQUITY AND LIABILITIES
Equity
Share capital 21 43,793,882 43,793,882
Share premium 21 178,746,337 178,746,337
Merger reserve (6,520,807) (6,520,807)
Legal reserve 6,400,000 6,400,000
Share-based payments reserve 13,264,154 11,341,219
Treasury shares (18,285,402) (3,501,200)
Cash flow hedge reserve (8,958,569) (6,147,575)
Retained earnings 233,223,501 219,225,419
-------------- --------------
Equity attributable to equity holders
of the Parent 441,663,096 443,337,275
Non-controlling interests 8,551,656 9,387,205
-------------- --------------
Total equity 450,214,752 452,724,480
-------------- --------------
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 18 341,251,756 322,354,493
Bonds payable 19 314,291,958 313,158,968
Lease liabilities 17 13,359,957 13,316,152
Provisions 20 17,840,957 16,375,652
Derivative financial instrument 27 9,093,581 6,584,893
Deferred mobilisation revenue 13,449,660 11,751,262
Other non-current payables 10,331,565 10,988,839
-------------- --------------
Total non-current liabilities 719,619,434 694,530,259
-------------- --------------
Current liabilities
Trade and other payables 16 185,850,756 196,329,456
Interest-bearing loans and borrowings 18 84,214,117 83,692,835
Provisions 20 177,390 1,100,000
Due to related parties 24 58,221 58,224
Derivative financial instrument 27 5,449,016 3,131,728
-------------- --------------
Total current liabilities 275,749,500 284,312,243
-------------- --------------
Total liabilities 995,368,934 978,842,502
-------------- --------------
TOTAL EQUITY AND LIABILITIES 1,445,583,686 1,431,566,982
============== ==============
The accompanying notes 1 to 30 form an integral part of these
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
For the six months period ended 30 June 2020 (Unaudited)
Share-based Cash flow
Share Share Merger Legal payment hedge Treasury Retained Non-controlling Total
US$ capital premium reserve reserve reserve reserve shares earnings Total interests Equity
--------------- ----------- ------------ ------------ ---------- ------------ ------------ ------------- ------------ ------------- ---------------- -------------
Balance at 1
January
2020 43,793,882 178,746,337 (6,520,807) 6,400,000 11,341,219 (6,147,575) (3,501,200) 219,225,419 443,337,275 9,387,205 452,724,480
Dividends
(Note
28) - - - - - - - - - (2,306,102) (2,306,102)
Profit for the
period - - - - - - - 13,998,082 13,998,082 1,470,553 15,468,635
Other
comprehensive
loss for the
period - - - - - (2,810,994) - - (2,810,994) - (2,810,994)
----------- ------------ ------------ ---------- ------------ ------------ ------------- ------------ ------------- ---------------- -------------
Total
comprehensive
income for
the
period - - - - - (2,810,994) - 13,998,082 11,187,088 1,470,553 12,657,641
Treasury
Shares
(Note 21) - - - - - - (14,784,202) - (14,784,202) - (14,784,202)
Share-based
payments
(Note 22) - - - - 1,922,935 - - - 1,922,935 - 1,922,935
Balance at 30
June 2020 43,793,882 178,746,337 (6,520,807) 6,400,000 13,264,154 (8,958,569) (18,285,402) 233,223,501 441,663,096 8,551,656 450,214,752
=========== ============ ============ ========== ============ ============ ============= ============ ============= ================ =============
Share-based
Share Share Merger Legal payment Retained Non-controlling Total
US$ capital premium reserve reserve reserve earnings Total interests Equity
--------------- ----------- ------------ ------------ ---------- ------------ ------------ ------------ ---------------- ------------
Balance at 1
January 2019 43,793,882 178,746,337 (6,520,807) 6,400,000 - 191,115,161 413,534,573 8,987,787 422,522,360
Profit for the
period,
restated* - - - - - 2,205,550 2,205,550 1,029,765 3,235,315
Other - - - - - - - - -
comprehensive
income for
the period
----------- ------------ ------------ ---------- ------------ ------------ ------------ ---------------- ------------
Total
comprehensive
income for
the period,
restated* - - - - - 2,205,550 2,205,550 1,029,765 3,235,315
Share-based
payments - - - - 7,470,824 - 7,470,824 - 7,470,824
Balance at 30
June 2019 43,793,882 178,746,337 (6,520,807) 6,400,000 7,470,824 193,320,711 423,210,947 10,017,552 433,228,499
=========== ============ ============ ========== ============ ============ ============ ================ ============
*Comparative information has been adjusted to reflect the IFRS 3
Business combination measurement period adjustments, refer to note
3.
The accompanying notes 1 to 30 form an integral part of these
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months period ended 30 June 2020 (Unaudited)
Notes 30 June 2019
US$ 30 June 2020 (Restated*)
------------------------------------------- ------ -------------------------- -------------------------
OPERATING ACTIVITIES
Profit for the period before income
tax 21,499,278 7,469,340
Adjustments for:
Depreciation of property, plant
and equipment 14 28,425,621 20,244,491
Amortisation of intangible assets 15 68,683 59,297
Depreciation of right of use assets 17 2,676,188 2,669,341
Provision for impairment of trade
receivables and contract assets 12 2,558,649 -
End of services provision 20 2,550,346 1,745,191
Share-based payments expense 22 1,922,935 7,470,824
Inventory impairment provision 11 220,331 -
Capital loss from assets disposal 14 333,176 -
Finance costs 8 31,545,379 52,676,090
Finance income 10 (481,305) (123,982)
Bargain purchase gain 3 - (11,877,674)
Share of results of investment in
a joint venture and an associate 172,568 211,209
Fair value loss on derivative financial
instrument 27 2,014,982 4,552,299
-------------------------- -------------------------
Cash from operations before working
capital changes 93,506,831 85,096,426
Inventories (3,384,276) (1,380,625)
Trade receivables 2,254 (44,411,798)
Contract assets 7,306,747 1,022,331
Due from related parties 660,519 (2,626,296)
Prepayments and other receivables 4,902,901 (25,990,149)
Trade and other payables 4,846,779 52,464,763
Due to related parties (3) 2,119
-------------------------- -------------------------
Cash flows from operations 107,841,752 64,176,771
Income tax paid (3,869,280) (2,279,508)
Provisions paid 20 (2,007,651) (360,481)
-------------------------- -------------------------
Net cash flows from operating activities 101,964,821 61,536,782
-------------------------- -------------------------
INVESTING ACTIVITIES
Purchase of intangible assets 15 (23,250) -
Purchase of property, plant and equipment (64,444,163) (100,155,423)
Acquisitions of subsidiaries and
new rigs - (76,237,278)
Interest received 481,305 123,982
Investment in an associate - (490,000)
-------------------------- -------------------------
Net cash flows used in investing
activities (63,986,108) (176,758,719)
-------------------------- -------------------------
FINANCING ACTIVITIES
Proceeds from interest-bearing loans
and borrowings 64,000,000 85,585,672
Repayment of interest-bearing loans
and borrowings (46,132,450) (337,900,000)
Proceeds from bonds issuance 19 - 325,000,000
Payments of loan/bonds transaction
costs - (12,941,008)
Interest paid (30,175,949) (31,688,558)
Treasury shares acquired (14,271,474) -
Dividend payments 28 (2,306,102) -
Payment of lease liabilities 17 (3,089,770) (3,395,099)
-------------------------- -------------------------
Net cash flows from financing activities (31,975,745) 24,661,007
-------------------------- -------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 6,002,968 (90,560,930)
Cash and cash equivalents at the
beginning of the period 10 119,601,159 130,875,239
-------------------------- -------------------------
CASH AND CASH EQUIVALENTS AT THE OF THE PERIOD 10 125,604,127 40,314,309
========================== =========================
*Comparative information has been adjusted to reflect the IFRS 3
Business combination measurement period adjustments, refer to note
3.
The accompanying notes 1 to 30 form an integral part of these
consolidated financial statements.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
at 30 June 2020 (Unaudited)
1 BACKGROUND
Corporate information
ADES International Holding PLC (the "Company" or the "Parent")
was incorporated and registered in the Dubai International
Financial Centre (DIFC) on 22 May 2016 with registered number 2175
under the Companies Law - DIFC Law No. 2 of 2009 (and any
regulations thereunder) as a private company limited by shares. The
Company's shares are listed on the Main Market of the London Stock
Exchange. The Company's registered office is at level 5, Index
tower, Dubai International Financial Centre, PO Box 507118, Dubai,
United Arab Emirates. The principal business activity of the
Company is to act as a holding company and managing office. The
Company and its subsidiaries (see below) constitute the Group (the
"Group"). The Company is owned by ADES Investments Holding Ltd., a
company incorporated on 22 May 2016 under the Companies Law, DIFC
Law no. 2 of 2009, which is the majority shareholder and ultimate
controlling party.
These interim condensed consolidated financial statements have
been approved by the Board of Directors on 17 September 2020.
The Group is a leading oil and gas drilling and production
services provider in the Middle East and Africa. The Group services
primarily include offshore and onshore contract drilling and
production services. The Group currently operates in Egypt,
Algeria, Kuwait and the Kingdom of Saudi Arabia. The Group's
offshore services include drilling and workover services and Mobile
Offshore Production Unit (MOPU) production services, as well as
accommodation, catering and other barge-based support services. The
Group's onshore services primarily encompass drilling and work over
services. The Group also provides projects services (outsourcing
various operating projects for clients, such as maintenance and
repair services).
The interim condensed consolidated financial statements of the
Group include activities of the following main subsidiaries:
Country % equity interest
of incorporation
-------------------------- ------------------- --------------------
Name Principal activities 2020 2019
-------------------------- ---------------------------- ------------------- --------- ---------
Oil and gas drilling
Advanced Energy Systems and production
(ADES) (S.A.E)* services Egypt 100% 100%
Precision Drilling
Company** Holding company Cyprus 100% 100%
Kuwait Advanced Drilling
Services Leasing of rigs Cayman 100% 100%
Prime innovations for
Trade S.A.E Trading Egypt 100% 100%
ADES International
for Drilling Leasing of rigs Cayman 100% 100%
ADES-GESCO Training
Academy Training Egypt 70% 70%
Advanced Transport Leasing of transportation
Services equipment Cayman 100% 100%
--------------------------- --------------------------- ------------------- --------- ---------
* Advanced Energy Systems (ADES) (S.A.E) has branches in the
Kingdom of Saudi Arabia, Algeria, Abu Dhabi and Iraq.
** Precision Drilling Company holds 47.5% interest in United
Precision Drilling Company W.L.L, a Kuwait entity which handles the
operations of the rigs in Kuwait.
The Company holds an investment in Egyptian Chinese Drilling
Company (ECDC) (joint venture) and ADVantage for Drilling Services
Company (associate) which are accounted for using equity method of
accounting in these interim condensed consolidated financial
statements.
In 2016, pursuant to a reorganisation plan (the
"Reorganisation") the ultimate shareholders of the Subsidiary:
(i) established the Company as a new holding company with share
capital of USD 1,000,000 and made an additional capital
contribution of USD 30,900,000 for additional shares that were
allotted on 23 March 2019. No such reorganisations took place in
2020 and 2019.
(ii) transferred their shareholdings in Advanced Energy System
(ADES) (S.A.E.) to the Company for a total consideration of USD
38,520,807 comprising of cash of USD 29,710,961 and the assumption
of shareholder obligation of USD 8,809,846.
2 SIGNIFICANT ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION
The interim condensed consolidated financial statements of the
Group for the six months period ended 30 June 2020 have been
prepared in accordance with International Accounting Standard 34,
Interim Financial Reporting.
The interim condensed consolidated financial statements have
been prepared under the historical cost basis, except for
derivative financial instruments carried at fair value which
include interest rate swap contracts classified as held-for-trading
and those designated as hedging instrument. Historical cost is
generally based on the fair value of the consideration given in
exchange for goods and services.
The interim condensed consolidated financial statements are
presented in United States Dollars ("USD"), which is the functional
currency of the Parent Company and the presentation currency for
the Group.
The interim condensed consolidated financial statements do not
contain all information and disclosures required for full financial
statements prepared in accordance with International Financial
Reporting Standards and should be read with the Group's annual
financial statements as at 31 December 2019. The results for the
period ended 30 June 2020 are not necessarily indicative of the
results that may be expected for the financial year ending 31
December 2020.
Basis of consolidation
The interim condensed consolidated financial statements comprise
the financial statements of the Company and its subsidiaries as at
30 June 2020. Control is achieved when the Group is exposed, or has
rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee. Specifically, the Group controls an investee if, and
only if, the Group has:
(a) Power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee)
(b) Exposure, or rights, to variable returns from its involvement with the investee, and
(c) The ability to use its power over the investee to affect its returns
Generally, there is a presumption that a majority of voting
rights results in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
(a) The contractual arrangement with the other vote holders of the investee
(b) Rights arising from other contractual arrangements
(c) The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of other comprehensive income
(OCI) are attributed to the equity holders of the parent of the
Group and to the non-controlling interests, even if this results in
the non-controlling interests having a deficit balance. When
necessary, adjustments are made to the consolidated financial
statements of subsidiaries to bring their accounting policies into
line with the Group's accounting policies. All intra-group assets
and liabilities, equity, income, expenses and cash flows relating
to transactions between members of the Group are eliminated in full
on consolidation. Subsidiaries are fully consolidated from the date
of acquisition or incorporation, being the date on which the Group
obtains control, and continue to be consolidated until the date
when such control ceases. The Consolidated financial statements of
the subsidiaries are prepared for the same reporting period as the
Group, using consistent accounting policies.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction. If the
Group loses control over a subsidiary, it:
- Derecognises the assets (including goodwill) and liabilities of the subsidiary
- Derecognises the carrying amount of any non-controlling interests
- Derecognises the cumulative translation differences recorded in equity
- Recognises the fair value of the consideration received
- Recognises the fair value of any investment retained
- Recognises any surplus or deficit in profit or loss
- Reclassifies the parent's share of components previously
recognised in OCI to profit or loss or retained earnings, as
appropriate, as would be required if the Group had directly
disposed of the related assets or liabilities.
2.2 NEW STANDARDS AND INTERPRETATIONS
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
financial statements for the year ended 31 December 2019, except
for the adoption of new standards and interpretations as of 1
January 2020.
The following new standards and amendments became effective as
at 1 January 2020, which did not have an impact on the interim
condensed consolidated financial statements of the Group:
-- Amendments to IFRS 3 Definition of a Business
-- Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate
Benchmark Reform
-- Amendments to IAS 1 and IAS 8 Definition of Material
-- Conceptual Framework for Financial Reporting
The Group did not early adopt any standard, interpretation or
amendment that was issued but is not yet effective.
3 BUSINESS COMBINATIONS
As part of the Group's strategy to expand its fleet and
operations, the Group has acquired the assets and entities which
are accounted for as business combinations. These business
combinations resulted in bargain purchase transactions because the
fair value of assets acquired and liabilities assumed exceeded the
total fair value of the consideration paid and the fair value of
non- controlling interests.
Acquisitions of the rigs from Weatherford Drilling International
- recorded in period ended 30 June 2019
On 27 February 2019 and 25 March 2019, the Group acquired
certain assets from Weatherford Drilling International in Algeria
and Iraq, respectively. The acquisitions have been accounted for
using the acquisition method.
The Group acquired 6 onshore rigs in Algeria and related
equipment, drilling contracts, other vendor contracts, certain
employees, spare parts to be used in the drilling business, the
business intellectual property and records related to the drilling
business. While in Iraq, the Group acquired 2 onshore rigs and
related equipment, certain employees, spare parts to be used in the
drilling business, the business intellectual property and records
related to the drilling business.
Identifiable net assets acquired
The fair value of the identifiable assets and liabilities as at
the acquisition were:
Fair values recognized
Fair values recognized on acquisition
US$ on acquisition (Algeria) (Iraq)
----------------------------------------------- -------------------------- -----------------------
Property, plant and equipment 55,983,324 17,200,000
Inventory 8,553,595 -
-------------------------- -----------------------
Total identifiable net assets at fair
value 64,536,919 17,200,000
-------------------------- -----------------------
Bargain purchase gain arising on acquisitions (6,677,674) (5,200,000)
-------------------------- -----------------------
Purchase considerations 57,859,245 12,000,000
========================== =======================
Analysis of cash flow on acquisition
(included in cash flows from investing
activities)
Cash paid (60,000,000) (12,000,000)
Cash collected* 2,140,755 -
-------------------------- -----------------------
Net cash out flows on acquisition (57,859,245) (12,000,000)
========================== =======================
*The Group claimed and collected USD 2,140,755 from the Seller
which represents a backlog deduction at the closing date for
Algeria as per the terms of the Sales and Purchase Agreement signed
between WDI and the Group.
Comparative Information
During the year ended 31 December 2019, the Group completed the
necessary analysis on the fair values of assets and liabilities
acquired in Algeria and Iraq, which resulted in decrease in the
fair value of the assets acquired with the corresponding decrease
in depreciation charge recorded as cost of revenue and in bargain
purchase gain:
IFRS 3 Business
As previously Combination
reported measurement Restated balances
US$ 30 June 2019 period adjustment 30 June 2019
----------------------------------------- ---------------------- ------------------- -----------------------
Consolidated statement of comprehensive
income:
Cost of revenue (128,511,093) (346,331) (128,857,424)
Bargain purchase gain 20,340,755 (8,463,081) 11,877,674
Consolidated statement of cash
flow:
Profit for the period before
income tax 16,278,752 (8,809,412) 7,469,340
Depreciation of property, plant
and equipment 19,898,160 346,331 20,244,491
Bargain purchase gain (20,340,755) 8,463,081 (11,877,674)
4 SEGMENT INFORMATION
Management has determined the operating segments based on the
reports reviewed by the Chief Executive Officer (CEO) that are used
to make strategic decisions. As operationally, the Group is only in
the oil and gas production and drilling services, the CEO considers
the business from a geographic perspective and has identified five
geographical segments (2019: five geographical segments).
Management monitors the operating results of its segments
separately for the purpose of making decisions about resource
allocation and performance assessment.
Egypt Algeria KSA Kuwait United Total segment Adjustments Total****
Arab and
Segment (US$) Emirates**** eliminations***
---------------- ------------- ------------- ------------- ------------- ------------- -------------- ------------------ --------------
For the period
ended 30 June
2020
Revenue
External
customers 39,166,679 9,331,460 135,090,438 65,736,663 - 249,325,240 - 249,325,240
Inter-segment 38,419,323 - - - - 38,419,323 (38,419,323) -
------------- ------------- ------------- ------------- ------------- -------------- ------------------ --------------
Total Revenue 77,586,002 9,331,460 135,090,438 65,736,663 - 287,744,563 (38,419,323) 249,325,240
============= ============= ============= ============= ============= ============== ================== ==============
Expenses
Cost of
revenue* (18,138,882) (7,060,598) (71,251,486) (30,768,448) - (127,219,414) - (127,219,414)
General and
administrative
expenses (2,242,855) (1,434,652) (15,059,546) (4,702,915) (3,133,478) (26,573,446) - (26,573,446)
Finance costs
(net) (2,410,774) (1,261,222) (18,081,743) (9,310,335) - (31,064,074) - (31,064,074)
Depreciation
and
amortisation (12,372,887) (1,223,050) (10,233,731) (6,990,496) - (30,820,164) - (30,820,164)
Other expenses
(net)** (3,081,986) (499,014) (7,408,684) (2,077,278) (5,112,545) (18,179,507) - (18,179,507)
------------- ------------- ------------- ------------- ------------- -------------- ------------------ --------------
Profit /
(Loss)-
excluding
inter-segment
revenue 919,295 (2,147,076) 13,055,248 11,887,191 (8,246,023) 15,468,635 - 15,468,635
============= ============= ============= ============= ============= ============== ================== ==============
Total Assets as
at 30 June
2020 (i) 835,400,982 90,010,389 152,335,994 341,118,092 26,718,229 1,445,583,686 - 1,445,583,686
============= ============= ============= ============= ============= ============== ================== ==============
Total
Liabilities as
at 30
June 2020 411,518,795 12,590,439 67,286,648 76,851,407 427,121,645 994,368,934 - 995,368,934
============= ============= ============= ============= ============= ============== ================== ==============
Other Segment
information
(30 June 2020)
Capital
expenditure
(i) 20,481,580 46,581 15,373,774 12,366,351 - 48,268,286 - 48,268,286
Intangible
assets
expenditure 23,250 - - - - 23,250 - 23,250
------------- ------------- ------------- ------------- ------------- -------------- ------------------ --------------
Total 20,504,830 46,581 15,373,774 12,366,351 - 48,291,536 - 48,291,536
============= ============= ============= ============= ============= ============== ================== ==============
4 SEGMENT INFORMATION (continued)
Egypt Algeria KSA Kuwait United Total segment Adjustments Total****
Arab and
Segment (US$) Emirates**** eliminations***
---------------- -------------- ------------- -------------- ------------- -------------- --------------- ------------------ ---------------
For the year
ended 30 June
2019
Revenue
External
customers 43,570,858 16,304,642 121,007,781 39,057,184 - 219,940,465 - 219,940,465
Inter-segment 41,852,822 - - - - 41,852,822 (41,852,822) -
-------------- ------------- -------------- ------------- -------------- --------------- ------------------ ---------------
Net Revenue 85,423,680 16,304,642 121,007,781 39,057,184 - 261,793,287 (41,852,822) 219,940,465
============== ============= ============== ============= ============== =============== ================== ===============
Expenses
Cost of
revenue* (17,763,339) (8,541,980) (59,682,185) (20,745,900) - (106,733,404) - (106,733,404)
General and
administrative
expenses (6,708,344) (1,183,065) (10,154,510) (3,835,052) (2,111,530) (23,992,501) - (23,992,501)
Finance costs
(net) (5,342,786) (2,045,718) (15,182,659) (4,900,444) (25,080,501) (52,552,108) - (52,552,108)
Depreciation
and
amortisation (11,189,814) (4,150,058) (6,715,548) (68,600) - (22,124,020) - (22,124,020)
Other expenses
(net)** (890,694) (170,055) (6,315,011) (1,339,497) (2,587,860) (11,303,117) - (11,303,117)
-------------- ------------- -------------- ------------- -------------- --------------- ------------------ ---------------
Profit /
(Loss)-
excluding
inter-segment
revenue 1,675,881 213,766 22,957,868 8,167,691 (29,779,891) 3,235,315 - 3,235,315
============== ============= ============== ============= ============== =============== ================== ===============
Total Assets as
at 31 December
2019 (i) 863,562,100 98,630,862 108,650,199 346,575,615 14,148,206 1,431,566,982 - 1,431,566,982
============== ============= ============== ============= ============== =============== ================== ===============
Total
Liabilities as
at 31
December 2019 374,171,422 16,943,110 58,622,288 94,608,532 434,497,150 978,842,502 - 978,842,502
============== ============= ============== ============= ============== =============== ================== ===============
Other Segment
information
(30 June 2019)
Capital
expenditure
(i) 15,233,746 56,640,921 41,010,083 76,381,016 - 189,265,766 - 189,265,766
Intangible - - - - - - - -
assets
expenditure
-------------- ------------- -------------- ------------- -------------- --------------- ------------------ ---------------
Total 15,233,746 56,640,921 41,010,083 76,381,016 - 189,265,766 - 189,265,766
============== ============= ============== ============= ============== =============== ================== ===============
* excluding depreciation and amortisation.
** Other expenses includes end of service provision, provision
for impairment of inventory, provision for impairment of trade
receivables, share-based payments expense, business acquisition
transaction costs, capital loss from asset disposal, other taxes,
income tax expense and other expenses which are stated net off
release of provision for impairment of trade receivables, bargain
purchase gain, fair value gain/(loss) on derivative financial
instrument and other income.
*** Inter-segment revenues and other adjustments are eliminated
upon consolidation and reflected in the 'adjustments and
eliminations' column.
**** The United Arab Emirates (UAE) is included in reports
reviewed by CEO. While ADES does not have business activities in
the UAE, ADES is participating in tendering activities and
therefore management believes it has potential to generate revenue
in the future.
(i) Management presents the assets in the segment which holds
such assets, while the capital expenditure are presented in the
segment where such assets are utilised.
5 REVENUE FROM CONTRACT WITH CUSTOMERS
US$ 30 June 2020 30 June 2019
------------------- ------------- -------------
Units operations 241,519,942 210,160,097
Catering services 4,230,254 3,837,612
Projects income * 79,200 3,957,421
Others 3,495,844 1,985,335
------------- -------------
249,325,240 219,940,465
============= =============
*Projects income represents services relating to outsourcing
various operating projects for clients such as manpower, well
platform installation, maintenance and repair services.
The disaggregation of revenue in accordance with IFRS 15 is in
line with the segments disclosed in Note 4 above as the management
monitors the revenue geographically and the main operational
revenue stream is drilling services (units operations) and the
revenue is recognised over the time of service.
6 COST OF REVENUE
30 June 2019
US$ 30 June 2020 (Restated*)
------------------------------ ------------- -------------
Staff costs** 62,116,891 45,051,645
Repair and maintenance costs 20,345,024 22,272,588
Depreciation 30,820,164 22,124,019
Rental equipment 5,292,564 2,962,979
Insurance 2,890,133 3,007,019
Project direct costs 1,333 2,088,268
Other costs 36,573,469 31,350,906
------------- -------------
158,039,578 128,857,424
============= =============
* The corresponding figures for 2019 have been adjusted to
reflect the IFRS 3 Business combination measurement period
adjustments as discussed in Note 3.
** It i ncludes staff cost of USD 3,327,510 in relation to the
overstay of the crew due to COVID 19 (30 June 2019: NIL)
7 GENERAL AND ADMINISTRATIVE EXPENSE
US$ 30 June 2020 30 June 2019
------------------------------- ------------- -------------
Staff costs* 16,923,746 14,517,595
Depreciation and amortisation 350,328 849,110
Professional fees 2,083,262 1,393,764
Business travel expenses 1,091,235 1,325,402
Free zone expenses 2,069,474 1,875,515
Rental expenses 424,156 607,896
Other expenses 3,631,245 3,423,219
26,573,446 23,992,501
============= =============
* It includes staff cost of USD 3,254,682 in relation to the
integration project (30 June 2019: NIL) which is estimated based on
the number of hours spent on the project.
8 FINANCE COSTS
US$ 30 June 2020 30 June 2019
----------------------------------------------- -------------------- ------------------------
Loan interest expense 11,727,045 18,552,330
Loan fees and written off prepaid transaction
cost 2,202,099 25,080,501
Bond interest and bond fees amortisation 15,148,618 5,139,064
Guarantee related finance charges 1,568,293 2,041,387
Interest on lease liabilities 400,306 649,687
IRS related finance charges 1,658,399 461,761
Interest on overdraft facilities 840,602 321,270
Unwinding of discounting of a long-term (2,152,932) -
trade receivable
Other finance charges 152,949 430,090
-------------------- ------------------------
31,545,379 52,676,090
==================== ========================
9 INCOME TAX
US$ 30 June 2020 30 June 2019
------------------------------------------- ------------- -------------
Consolidated statement of profit or loss:
Current income tax expense* 6,030,643 4,234,025
============= =============
*Current income tax expense includes withholding taxes on
intercompany rentals in the Kingdom of Saudi Arabia amounting to
USD 2,524,368 (30 June 2019: USD 2,118,101).
The Group operates in jurisdictions which are subject to tax at
higher rates than the statutory corporate tax rate of 0%, which is
applicable to profits in Algeria, Kingdom of Saudi Arabia and
Kuwait where applicable tax rate is 26%, 20% and 15%,
respectively.
Egyptian corporations are normally subject to corporate income
tax at a statutory rate of 22.5% however the Company has been
registered in a Free Zone in Alexandria under the Investment Law No
8 of 1997 which allows exemption from corporate income tax.
10 BANK BALANCES AND CASH
31 December
US$ 30 June 2020 2019
--------------------------------------------- ------------- ----------------
Cash on hand 170,503 21,245
Bank balances 107,742,643 56,373,290
Time deposits 17,690,981 63,206,624
------------- --------------
Cash and cash equivalents for the purpose
of statement of cash flows 125,604,127 119,601,159
============= ==============
Bank balances and cash comprise of balances
in the following currencies:
*United States Dollar (USD) 66,939,005 97,150,110
Saudi Riyal (SAR) 36,266,674 4,367,958
*Egyptian Pound (EGP) 10,042,470 3,879,327
United Arab Emirates Dirham (AED) 48 38
Great British Pound (GBP) 74 160
Euro (EUR) 1,303 883
Algerian Dinar (DZD) 853,725 1,377,837
Kuwaiti Dinar (KWD) 11,500,828 12,824,846
125,604,127 119,601,159
============= ================
*Time deposits represent short-term investment. Time deposits
have original maturities of less than 90 days and earns average
interest of 2.3% per annum for USD time deposits and 9% per annum
for EGP time deposits (2019: 3.5% per annum). The finance income
reported in the consolidated statement of comprehensive income for
the period ended 30 June 2020 amounted to USD 481,305 (2019: USD
123,982).
11 INVENTORIES
31 December
US$ 30 June 2020 2019
--------------------- ------------- ------------
Offshore rigs 21,874,755 19,818,133
Onshore rigs 8,654,836 8,295,669
Warehouse and yards 17,454,518 16,706,362
47,984,109 44,820,164
============= ============
As at 30 June 2020, the inventories are stated net of provision
for impairment of inventory of USD 473,660 (2019: 253,329).
12 TRADE RECEIVABLES AND CONTRACT ASSETS
Trade receivables
31 December
US$ 30 June 2020 2019
----------------------------------------------- ------------------- ---------------------
Trade receivables 135,295,561 132,896,203
Provision for impairment in trade receivables (4,726,770) (2,168,121)
------------------- ---------------------
130,568,791 130,728,082
=================== =====================
Maturing within 12 months 113,813,826 91,780,792
Maturing after 12 months 16,754,965 38,947,290
------------------- ---------------------
Balance as at 31 December 130,568,791 130,728,082
=================== =====================
Trade receivables are non-interest bearing and are generally on
30 to 90 days terms, except for one customer which is recorded as
non-current, after which trade receivables are considered to be
past due. Unimpaired trade receivables are expected to be fully
recoverable on the past experience. It is not the practice of the
Group to obtain collateral over receivables and the vast majority
are, therefore, unsecured.
Contract assets
As at 30 June 2020, the Group has contract assets of USD
34,234,563 (2019: 41,541,310).
The movement in the provision for impairment of trade
receivables and contract assets is as follows:
31 December
US$ 30 June 2020 2019
------------------------ ------------------- ---------------------
As at 1 January 2,168,121 4,944,373
Charge for the period 2,558,649 -
Release for the period - (2,776,252)
------------------- ---------------------
As at 30 June 4,726,770 2,168,121
=================== =====================
As at 30 June, the aging analysis of un-impaired trade
receivables is as follows:
Past due but not impaired
--------------------------------------------------------------
Neither past 30 - 60 61 - 90
US$ due nor impaired <30 days days days >90 days Total
30 June
2020 99,996,240 7,389,894 5,273,555 2,690,056 15,219,046 130,568,791
================== =========== ========== ========== =========== ============
31 December
2019 99,540,594 10,527,810 2,668,836 1,808,191 16,182,651 130,728,082
================== =========== ========== ========== =========== ============
The largest portion of balances is from one customer of the
Group, which is a partially government owned entity. In 2019 the
Group signed a settlement agreement with the customer to settle all
due balance and the management believes that the customer will be
able to fulfil its obligations. The application of forward-looking
information has no material impact on the ECL provision.
13 PREPAYMENTS AND OTHER RECEIVABLES
31 December
US$ 30 June 2020 2019
--------------------------------------------------- ------------- ------------
Invoice retention 38,932,589 44,361,741
Margin LG 4,212,567 2,379,048
Advances to contractors and suppliers 11,569,180 12,018,430
Insurance with customers 5,833,657 3,979,741
Dividends receivable 1,225,000 1,225,000
Provision for impairment in dividends receivables -245,000 -245,000
Other receivables 7,679,731 8,431,595
69,207,724 72,150,555
============= ============
14 PROPERTY AND EQUIPMENT
US$ Rigs * Furniture Drilling Tools Assets under IT Motor Leasehold Total
& Fixtures pipes construction Equipment Vehicles Improvements
=================== ================== =============== ============= ============= =============== =========== =========== =================== ==============
Cost:
As at 1 January
2020 986,786,882 1,513,178 15,696,517 42,724,619 79,914,429 956,580 249,765 687,471 1,128,529,441
Additions 10,900,840 180,975 2,350,370 3,304,252 31,328,515 167,334 36,000 - 48,268,286
Retirement &
Disposal - (514,724) - - - - - (162,413) (677,137)
Reclassification (9,230,748) - - 9,230,748 - - - - -
Transfers 1,037,684 - - 581,403 (1,715,048) 33,486 - - (62,475)
------------------ --------------- ------------- ------------- --------------- ----------- ----------- ------------------- --------------
As at 30 June
2020 989,494,658 1,179,429 18,046,887 55,841,022 109,527,896 1,157,400 285,765 525,058 1,176,058,115
------------------ --------------- ------------- ------------- --------------- ----------- ----------- ------------------- --------------
Accumulated
depreciation
and impairment:
As of 1 January
2020 (122,573,384) (595,198) (5,030,612) (11,358,115) (765,291) (573,029) (220,905) (196,593) (141,313,127)
Retirement &
Disposal - 251,116 - - - - - 92,845 343,961
Depreciation
for the period* (23,849,544) (76,250) (1,774,126) (2,568,448) - (77,125) (18,385) (61,743) (28,425,621)
------------------ --------------- ------------- ------------- --------------- ----------- ----------- ------------------- --------------
As of 30 June
2020 (146,422,928) (420,332) (6,804,738) (13,926,563) (765,291) (650,154) (239,290) (165,491) (169,394,787)
------------------ --------------- ------------- ------------- --------------- ----------- ----------- ------------------- --------------
Net book value:
At 30 June 2020 843,071,730 759,097 11,242,149 41,914,459 108,762,605 507,246 46,475 359,567 1,006,663,328
================== =============== ============= ============= =============== =========== =========== =================== ==============
31 December 2019
Cost:
As at 1 January
2019 645,604,819 1,188,005 13,137,229 30,586,817 124,673,795 777,987 249,765 256,804 816,475,221
Additions 13,231,608 219,577 461,069 6,420,413 218,467,321 47,137 - 36,747 238,883,872
Acquisitions
through business
combinations
(Note
6) 42,378,439 - - - 30,804,885 - - - 73,183,324
Transfers 285,572,016 105,596 2,098,219 5,717,389 (294,018,596) 131,456 - 393,920 -
Transfer to
intangible
assets - - - - (12,976) - - - (12,976)
------------------ --------------- ------------- ------------- --------------- ----------- ----------- ------------------- --------------
As at 31 December
2019 986,786,882 1,513,178 15,696,517 42,724,619 79,914,429 956,580 249,765 687,471 1,128,529,441
------------------ --------------- ------------- ------------- --------------- ----------- ----------- ------------------- --------------
Accumulated
depreciation
and impairment:
As of 1 January
2019 (82,370,839) (476,251) (3,268,635) (8,130,782) (765,291) (443,545) (184,137) (118,623) (95,758,103)
Depreciation
for the year (40,202,545) (118,947) (1,761,977) (3,227,333) - (129,484) (36,768) (77,970) (45,555,024)
------------------ --------------- ------------- ------------- --------------- ----------- ----------- ------------------- --------------
As of 31December
2019 (122,573,384) (595,198) (5,030,612) (11,358,115) (765,291) (573,029) (220,905) (196,593) (141,313,127)
------------------ --------------- ------------- ------------- --------------- ----------- ----------- ------------------- --------------
Net book value:
At 31 December
2019 864,213,498 917,980 10,665,905 31,366,504 79,149,138 383,551 28,860 490,878 987,216,314
================== =============== ============= ============= =============== =========== =========== =================== ==============
*Comparative information has been adjusted to reflect the IFRS 3
Business combination measurement period adjustments, refer to note
3.
14 PROPERTY AND EQUIPMENT (cont'd)
Depreciation charge is allocated as follows:
US$ 30 June 2020 30 June 2019
Cost of revenue (Note 6) 30,820,164 22,124,019
General and administrative expenses (Note
7) 350,328 849,110
------------- -------------
Total depreciation charge 31,170,492 22,973,129
============= =============
Assets under construction
Assets under construction represent the amounts that are
incurred for the purpose of upgrading and refurbishing property and
equipment until it is ready to be used in the operation. Assets
under construction will be transferred to 'Rigs' or 'Tools' of the
property and equipment after completion.
*Some of the rigs are pledged to the lenders (banks) against
loans and borrowings (Note 18).
15 INTANGIBLE ASSETS
31 December
US$ 30 June 2020 2019
------------------------------------------- --------------------- -----------------------
Cost:
As at 1 January 789,629 776,653
Additions 23,250 -
Transfer from property & equipment 62,475 12,976
--------------------- -----------------------
As at period/ year end 875,354 789,629
--------------------- -----------------------
Accumulated amortisation:
As at 1 January 442,325 320,464
Amortisation charge for the period/ year 68,683 121,861
--------------------- -----------------------
As at period/ year end 511,008 442,325
--------------------- -----------------------
Net carrying amount:
As at period/ year end 364,346 347,304
===================== =======================
Intangible assets represent computer software and the related
licenses.
16 TRADE AND OTHER PAYABLES
31 December
US$ 30 June 2020 2019
---------------------------------- ------------- ------------
Local trade payables 84,764,890 89,670,226
Foreign trade payables 21,398,077 24,930,548
Notes payable 2,680,633 2,371,597
Accrued expenses 35,467,691 41,035,747
Accrued interests 10,288,073 9,560,653
Income tax payable (Note 9) 12,369,615 9,975,938
Finance lease liability (Note17) 6,525,893 8,793,910
Other payables 12,355,884 9,990,837
185,850,756 196,329,456
============= ============
17 LEASES
Yard and Office Motor Other Equipment Furniture Building Total
(US$) Warehouse Premises Vehicles and Fixture
------------------- ------------ ----------- ----------- ---------------- ------------- ---------- ------------
Cost:
As at 1 January
2020 4,829,127 1,105,574 1,915,524 12,332,234 1,357,312 7,230,880 28,770,651
Additions 3,383 - (217,562) - 925,160 320,649 1,031,630
------------ ----------- ----------- ---------------- ------------- ---------- ------------
As at 30 June
2020 4,832,510 1,105,574 1,697,962 12,332,234 2,282,472 7,551,529 29,802,281
------------ ----------- ----------- ---------------- ------------- ---------- ------------
Accumulated
depreciation:
As at 1 January
2020 (1,224,677) (256,292) (678,170) (3,189,222) - - (5,348,361)
Depreciation (659,218) (128,026) (285,129) (1,572,350) - (31,465) (2,676,188)
------------ ----------- ----------- ---------------- ------------- ---------- ------------
As at 30 June
2020 (1,883,895) (384,318) (963,299) (4,761,572) - (31,465) (8,024,549)
------------ ----------- ----------- ---------------- ------------- ---------- ------------
Net book value:
As at 30 June
2020 2,948,615 721,256 734,663 7,570,662 2,282,472 7,520,064 21,777,732
============ =========== =========== ================ ============= ========== ============
Yard and Office Motor Vehicles Other Equipment Building Total
(US$) Warehouse Premises
------------------- ------------- ----------- --------------- ---------------- ---------- -------------
As at 1 January
2019 3,251,013 1,105,574 1,915,524 12,332,234 6,622,148 25,226,493
Additions 1,578,114 - - - 1,966,044 3,544,158
Depreciation (1,224,677) (256,292) (678,170) (3,189,222) - (5,348,361)
------------- ----------- --------------- ---------------- ---------- -------------
As at 31 December
2019 3,604,450 849,282 1,237,354 9,143,012 8,588,192 23,422,290
============= =========== =============== ================ ========== =============
Set out below are the carrying amounts of lease liabilities and
the movements during the year:
31 December
US$ 30 June 2020 2019
----------------------- -------------------- --------------------------------
As at 1 January 2020 22,110,062 24,769,237
Additions 501,991 2,909,853
Accretion of interest 363,567 1,376,722
Payments (3,089,770) (6,945,750)
-------------------- --------------------------------
As at 30 June 2020 19,885,850 22,110,062
==================== ================================
Current 6,525,893 8,793,910
Non-Current 13,359,957 13,316,152
==================== ================================
18 INTEREST-BEARING LOANS AND BORROWINGS
31 December
US$ 30 June 2020 2019
------------------------------------------ ------------------- ------------------------------
Balance as at 1 January 406,047,328 555,268,918
Borrowings drawn during the period/year 64,000,000 179,493,220
Borrowings repaid during the period/year (46,132,450) (351,018,420)
Amortised arrangement fees 1,550,995 22,303,610
------------------- ------------------------------
Balance as at 30 June 425,465,873 406,047,328
=================== ==============================
Maturing within 12 months 84,214,117 83,692,835
Maturing after 12 months 341,251,756 322,354,493
------------------- ------------------------------
Balance as at 30 June 425,465,873 406,047,328
=================== ==============================
June December
2020 2019
Type Interest rate % Latest maturity USD USD
--------------------- -------------------- ------------------ ------------------------ ---------------------
Current loans and borrowings
Loan 1 Syndication
Tranche A 5.0% + 6 Month LIBOR 3.5 years 15,050,000 15,050,000
-
Ijara Loan - -
3.25% + 6 Months
Tranche A SAIBOR 7 years 12,727,273 15,554,000
3.25% + 6 Months
Tranche B SAIBOR 7 years 12,727,273 15,554,000
3.25% + 6 Months
Tranche C SAIBOR 7 years 14,545,455 8,888,000
Tranche D 3.25% + 6 Months 7 years 12,800,000 -
SAIBOR
NCB Loan
NCB Loan 2.25%+SAIBOR 6 years 12,307,693 6,153,846
Credit facility 1 1.25% + Corridor Renewable (166) (177)
Credit facility 2 4.50% + 3 Month LIBOR Renewable 4,056,697 3,996,693
Credit facility 3 6.50% + 3 Month LIBOR Renewable - 3,551,531
Credit facility 4 4% + 3 Month LIBOR Renewable (108) 111,609
Credit facility 5 2% + 6 Month LIBOR Renewable - 5,333,333
RCF 3.5% + 3 Month LIBOR Renewable - 9,500,000
-------------------- --------------------
Total current loans and borrowings 84,214,117 83,692,835
June December
2020 2019
Type Interest rate % Latest maturity USD USD
--------------------- -------------------- ------------------ --------------------- ----------------------
Non-current loans and borrowings
Loan 1 Syndication
Tranche A 5.0% + 6 Month LIBOR 3.5 years 35,506,900 42,178,475
Tranche B 5.0% + 6 Month LIBOR 3.5 years 30,000,000 30,000,000
NCB Loan
NCB Loan 2.25%+SAIBOR 6 years 67,475,260 73,594,207
Ijara loan
3.25% + 6 Months
Tranche A SAIBOR 7 years 47,978,687 51,023,811
3.25% + 6 Months
Tranche B SAIBOR 7 years 50,909,091 54,446,000
3.25% + 6 Months
Tranche C SAIBOR 7 years 58,181,818 71,112,000
Tranche D 3.25% + 6 Months 7 years 51,200,000 -
SAIBOR
-------------------- --------------------
Total non-current loans and borrowings 341,251,756 322,354,493
-------------------- --------------------
Total loans and borrowings 425,465,873 406,047,328
The Group has secured loans and borrowings as follows:
Bank credit facilities
Credit facility 2 is granted by Industrial Development Bank of
Egypt (IDBE) with an overdraft facility limit amounting to USD 4
million.
Credit facility 3 is granted by the Al Ahli Bank of Kuwait (ABK)
with an overdraft facility limit amounting to USD 7 million.
Credit Facility 4 is granted by Export development Bank of Egypt
(EBE) with a non-secured facility limit amounting to USD 12 million
available for overdraft &/or Letters of Guarantees.
Credit Facility 5 is granted by National Commercial Bank in KSA
(NCB) with a total amount of SAR 30 million which is secured within
a basket of other facilities.
Financial Institutions (as defined in the Revolving Credit
Facility Agreement) made available a dollar revolving credit
facility dated 18 April 2019 to ADES International Holding PLC, in
the total principal amount of USD 50 million, which terms include
extensions, renewals or increases (which may be made thereto from
time to time).
Loan 1 - Syndication
On 2 May 2019, the Group has signed a syndication loan agreement
arranged by HSBC with total amount of USD 100 million divided over
four banks. The loan is divided into two tranches, the purpose and
the use of each facility is described as follows:
a) Tranche A
For refinancing existing financial indebtedness in full
(excluding the payment of the fees, costs and expenses incurred
under or in connection with the transaction documents). Tranche A
was utilised during the current year to partially settle Loan 2
Tranch A.
b) Tranche B
Tranche B was utilised during the current year to partially
settle Loan 2 Tranche B
Tranche A Facility is a medium-term loans over 3.5 years to be
paid semi-annually in un-equal instalments starting from 22
September 2019 and the last instalment will be on 22 March 2023.
Tranche B will be settled with bullet repayment on 22 March 2023
.
Loan 2 - Syndication
On 22 March 2018, the Group has signed a syndication loan
agreement arranged by Merrill Lynch International and EBRD with
total amount of USD 450 million divided over eleven banks. The loan
is divided into four tranches, the purpose and the use of each
facility is described as follows:
a) Tranche A
For refinancing existing financial indebtedness in full
(including the payment of the fees, costs and expenses incurred
under or in connection with the transaction documents). Tranche A
was utilised in 2018 to settle financial indebtedness. On 2 May
2019, USD 130 million was settled in cash and USD 70 million was
refinanced by Loan 1 Tranch A.
b) Tranche B
New working capital purposes and to refinance certain existing
working capital facilities. Tranche B was utilised in 2018. On 2
May 2019, USD 11.5 million was settled in cash and USD 30 million
was refinanced as discussed by Loan 1 Tranch B.
c) Tranche C
Capital expenditure for the acquisition of the new rigs and
mobile offshore production units. Tranche C was partially utilised
in 2018. On 2 May 2019, Tranche C was fully settled in cash.
d) "Murabaha Facility"
Capital expenditure for the acquisition of the new rigs and
mobile offshore production units. Murabaha Facility was partially
utilised in 2018. On 2 May 2019, Murabaha Facility was fully
settled in cash.
Ijara Loan
On 22 May 2018, the Group has signed "Musharakah" agreement and
"Ijara" agreement with Alinma Bank to finance the acquisition of
the new rigs and related capital expenditure with the amount of the
equivalent to USD 140 million in SAR.
On 25 April 2019, the Group has signed "Musharakah" agreement
and "Ijara" agreement with Alinma Bank to increase the facility to
the equivalent to USD 284 million. On 20 May 2020, the group
utilized equivalent to USD 64 million in SAR.
All loans are medium-term loans over 7 years which includes 2
year grace period and is paid semi-annually in equal instalments
starting from 10 June 2020 and the last instalment will be on 10
June 2024.
Ijara loan is secured by the rigs purchased from Nabors Drilling
International II Limited (Jackup rig Admarine 656, Jackup rig
Admarine 656 and Jackup rig Admarine 657) and rigs purchased from
Weatherford Drilling International (ADES 40, ADES 158, ADES 174,
ADES 799 and ADES 889, Rig 144, Rig 798, Rig 157, Rig 173).
NCB Loan
On 14 May 2019, the group signed a Long Term Loan Facility
agreement with National Commercial Bank ("NCB") for a total limit
of SAR 300 million (USD 80 million). As of 31 December 2019, the
Group has fully utilized the facility.
On 10 December 2019, the group has amended the facility with
National Commercial Bank ("NCB") to be Sharia compliant (Islamic
Facility) without any change in the original agreed terms.
The Group has secured interest-bearing loans and borrowings as
follows:
Bank credit facilities
Credit facility 2 is granted by the Egyptian Gulf Bank (EGB)
with an overdraft facility limit amounting to EGP 45,000,000 which
is secured by promissory note.
Credit facility 3 is granted by the Al Ahli Bank of Kuwait (ABK)
with an overdraft facility limit amounting to USD 7,000,000 which
is secured by promissory note.
Loan 1 - Syndication
On 2 May 2019, the Group has signed a syndication loan agreement
arranged by HSBC with total amount of USD 100 million divided over
four banks. The loan is divided into two tranches, the purpose and
the use of each facility is described as follows:
c) Tranche A
For refinancing existing financial indebtedness in full
(excluding the payment of the fees, costs and expenses incurred
under or in connection with the transaction documents). Tranche A
was utilised during the current year to partially settle Loan 2
Tranch A.
d) Tranche B
Tranche B was utilised during the current year to partially
settle Loan 2 Tranche B
Tranche A Facility is a medium-term loans over 3.5 years to be
paid semi-annually in un-equal instalments starting from 22
September 2019 and the last instalment will be on 22 March 2023.
Tranche B will be settled with bullet repayment on 22 March
2023
Loan 2 - Syndication
On 22 March 2018, the Group has signed a syndication loan
agreement arranged by Merrill Lynch International and EBRD with
total amount of USD 450 million divided over eleven banks. The loan
is divided into four tranches, the purpose and the use of each
facility is described as follows:
e) Tranche A
For refinancing existing financial indebtedness in full
(including the payment of the fees, costs and expenses incurred
under or in connection with the transaction documents). Tranche A
was utilised in 2018 to settle financial indebtedness. On 2 May
2019, USD 130 million was settled in cash and USD 70 million was
refinanced by Loan 1 Tranch A.
f) Tranche B
New working capital purposes and to refinance certain existing
working capital facilities. Tranche B was utilised in 2018. On 2
May 2019, USD 11.5 million was settled in cash and USD 30 million
was refinanced as discussed by Loan 1 Tranch B.
g) Tranche C
Capital expenditure for the acquisition of the new rigs and
mobile offshore production units. Tranche C was partially utilised
in 2018. On 2 May 2019, Tranch C was fully settled in cash.
h) "Murabaha Facility"
Capital expenditure for the acquisition of the new rigs and
mobile offshore production units. Murabaha Facility was partially
utilised in 2018. On 2 May 2019, Murabaha Facility was fully
settled in cash.
Ijara Loan
On 22 May 2018, the Group has signed "Musharakah" agreement and
"Ijara" agreement with Alinma Bank to finance the acquisition of
the new rigs and related capital expenditure. The Musharakah
facility amount is USD 200 million, of which 70% is financed by
Alinma Bank and 30% by the Group. On 11 June 2018, the Group
obtained USD 70 million from Alinma Bank within the framework of
"Musharakah" facility to finance the acquisition of three rigs from
Nabors (Note 5) and subsequent capital expenditures.
On 18 July 2018, the Group obtained USD 70 million from Alinma
Bank within the framework of "Musharakah" facility to finance the
acquisitions of three rigs from Weatherford Drilling International
(Note 5).
On 25 April 2019 , the Group has signed "Musharakah" agreement
and "Ijara" agreement with Alinma Bank to increase the facility to
USD 284 million .On 5 May 2019, the Group obtained additional USD
80 million from Alinma Bank within the framework of "Musharakah"
facility to finance the purchase and maintenance of rigs ADM 657,
Rig 40, Rig 158, Rig 174, Rig 799 and Rig 889 .
All loans are medium-term loans over 7 years which includes 2
year grace period and is paid semi-annually in equal instalments
starting from 10 June 2020 and the last instalment will be on 10
June 2024.
Ijara loan is secured by the rigs purchased from Nabors Drilling
International II Limited (Jackup rig Admarine 656, Jackup rig
Admarine 656 and Jackup rig Admarine 657) and rigs purchased from
Weatherford Drilling International (ADES 40, ADES 158, ADES 174,
ADES 799 and ADES 889) (Note 5).
Others
On 14 May 2019, the group signed a Long Term Loan Facility from
National Commercial Bank ("NCB") for a total limit of SAR 300
million (US$80 million). As of 30 June 2019, the Group has not
utilized any amounts under this facility.
On 6 May 2019, the group signed a multicurrency credit facility
agreement with Mashreq Bank PJSC Dubai and subsequent amendments
last of which being on 12 June 2019 for the total facility granted
by Mashreq Bank PSC Dubai to reach $70,000,000. As of 30 June 2019,
the Group has not utilized any amounts under this facility.
19 BONDS PAYABLE
On 16 April 2019, the Group issued USD 325,000,000 senior
secured notes at 8.625% interest due on 24 April 2024. Interest is
payable semi-annually on 24 April and 24 October each year
commencing on 24 October 2019. The Group paid USD 10,708,042 as
transaction costs for the issuance of the bonds. The Group
recognised interest expense of USD 15,148,618 for the six months
period ended 30 June 2020. The bonds payable is recognised at
amortised cost using the effective interest method.
20 PROVISIONS
*Accrued /
As at acquired during Paid during As at
US$ 1 January the period/year the period/year period/year end
30 June 2020
Provision for end of
service benefits 16,375,652 2,550,346 (1,085,041) 17,840,957
Other tax provisions
* 1,100,000 - (922,610) 177,390
---------- ---------------- ---------------- ----------------
17,475,652 2,550,346 (2,007,651) 18,018,347
========== ================ ================ ================
31 December 2019
Provision for end of
service benefits 12,959,590 4,899,967 (1,483,905) 16,375,652
Other tax provisions* 1,874,654 1,443,181 (2,217,835) 1,100,000
---------- ---------------- ---------------- ----------------
14,834,244 6,343,148 (3,701,740) 17,475,652
========== ================ ================ ================
* Other tax provisions mainly represent provision made for
employee's taxes and withholding taxes which are borne by the
Group. The total balance is presented as current in the statement
of financial position.
21 SHARE CAPITAL
Share capital of the Group comprise:
31 December
US$ 30 June 2020 2019
---------------------------------- ------------- -------------- --------------
Authorised shares* 1,500,000,000 1,500,000,000
Issued shares 43,793,882 43,793,882
Shares par value 1.00 1.00
-------------- --------------
Issued and paid up capital 43,793,882 43,793,882
============== ==============
Share premium** 178,746,337 178,746,337
============== ==============
The shareholding structure as at
30 June 2020 is:
Shareholding
% No. of Value
Shareholders shares US$
---------------------------------- ------------- -------------- --------------
ADES Investment Holding Ltd 61 26,889,499 26,889,499
Individual shareholders 39 16,904,383 16,904,383
------------- -------------- --------------
100 43,793,882 43,793,882
============= ============== ==============
The shareholding structure as at
31 December 2019 was:
Shareholding
% No. of Value
Shareholders shares US$
---------------------------------- ------------- ----------- -----------
ADES Investment Holding Ltd 62 27,179,084 27,179,084
Individual shareholders 38 16,614,798 16,614,798
------------- ----------- -----------
100 43,793,882 43,793,882
============= =========== ===========
*As at 30 June 2020 and 31 December 2019, the authorised share
capital of the Company was USD 1,500,000,000 comprising of
1,500,000,000 shares.
** Share premium represents the excess of fair value received
over the par value of shares issued as a result of business
combinations and IPO.
Movement in treasury shares as at 30 June 2020 is as
follows:
Shares Treasury Shares outstanding
issued shares*
-------------- ----------------------- ----------- ---------- -------------------
1 January Balance at beginning
2020 of year 43,793,882 300,000 43,493,882
Purchase of treasury
shares - 1,542,591 1,542,591
30 June 2020 Balance at period end 43,793,882 1,842,591 41,951,291
Movement in treasury shares as at 31 December 2019 is as
follows:
Shares Treasury Shares outstanding
issued shares*
------------- ---------------------- ----------- --------- -------------------
1 January Balance at beginning
2019 of year 43,793,882 - 43,793,882
Purchase of treasury
shares for cash - 300,000 300,000
31 December
2019 Balance at year end 43,793,882 300,000 43,493,882
* On 29 November 2019 the Group announced that pursuant to
Shareholders' authority granted at the Company's EGM on 30 October
2019, it intends to commence purchases of ordinary shares in the
capital of the Company. As at 30 June 2020 the total number of
purchased ordinary shares that are held as treasury shares is
1,842,591 purchased for a cumulative amount of USD 18,275,089.
22 EQUITY SETTLED SHARE-BASED PAYMENTS
Pursuant to the rules of the Long Term Incentive Plan ("LTIP")
adopted by ADES Investments Holding Ltd., the awards over a total
number of 1,136,451 ordinary shares of US$1.00 each in the capital
of the Company have been granted to certain employees of the
Company by ADES Investments Holding Ltd (the majority shareholder).
The LTIP is equity settled and effective from 1 January 2020.
According to the LTIP rules, the shares will be vested over a
period of three years and not subject to performance conditions.
These shares are currently held by ADES Investments Holding Ltd and
the awards will not be satisfied by the new issue of any shares in
the Company. Awards will normally lapse and cease to vest on
termination of employment.
The fair value at grant date was determined based on the market
price of the shares of the Company at grant date.
For the six months ended 30 June 2020, the Group has recognised
USD 1,922,935 of share-based payment expense in the consolidated
statement of profit or loss (30 June 2019: USD 7,470,824), with a
corresponding increase in equity (share-based payment reserve).
23 EARNINGS PER SHARE
Basic earnings per share (EPS) amounts are calculated by
dividing the profit for the year attributable to the ordinary
equity holders of the Parent by the weighted average number of
ordinary shares outstanding during the year.
Diluted EPS is calculated by adjusting the weighted average
number of ordinary shares outstanding assuming conversion of all
dilutive potential ordinary shares. As at 30 June 2020, there were
no potential dilutive shares and hence the basic and diluted EPS is
same.
The information necessary to calculate basic and diluted
earnings per share is as follows:
30 June 2019
US$ 30 June 2020 (restated*)
--------------------------------------------- ------------- -------------
Profit attributable to the ordinary equity
holders of the Parent for
basic and diluted EPS 13,998,082 2,205,548
------------- -------------
Weighted average number of ordinary shares
-
basic and diluted 43,222,712 43,793,882
------------- -------------
Earnings per share - basic and diluted (US$
per share) 0.32 0.05
============= =============
*Comparative information has been adjusted to reflect the IFRS 3
Business combination measurement period adjustments, refer to note
3.
24 RELATED PARTIES TRANSACTIONS AND BALANCES
Related party transactions
During the period, the following were the significant related
party transactions recorded in the interim condensed consolidated
statement of comprehensive income or consolidated statement of
financial position:
Due from balance with AMAK for Drilling & Petroleum Services
Co. (a related party under common control) relates to the funds
transferred for settlement of payables to purchase fixed
assets.
Related party balances
Significant related party balances included in the consolidated
statement of financial position are as follows:
30 June 2020 31 December 2019
------------------- -------------------
US$ Due from Due to Due from Due to
--------------------------------- ---------- ------- ---------- -------
Ultimate Shareholders
Sky Investment Holding Ltd. 60,000 - 60,000 -
Intro Investment Holding Ltd. 90,503 - 90,503 -
Shareholder
ADES Investment Holding Ltd 114,864 - 48,864
Joint venture
Egyptian Chinese Drilling Co.
(S.A.E.) - 57,192 - 57,192
Entities under common control
AMAK for Drilling & Petroleum
Services Co. 3,087,608 - 4,019,924
Intro for Trading & Contracting
Co. 266,715 - 39,738
Other related parties
TBS Holding 18,836 - 35,387 -
Misr El-Mahrousa 12,716 14,624
Advantage Drilling Services 422,550 425,271
Advansys Project 1,308 - 1,308 -
Advansys Holding 5,299 - 5,299 -
ADVANSYS FOR ENG.SERV. & CONS - 1,029 - 1,032
4,080,399 58,221 4,740,918 58,224
========== ======= ========== =======
Compensation of key management personnel
The remuneration of key management personnel during the period
was as follows:
US$ 30 June 2020 30 June 2019
----------------------- ------------- -------------
Short-term benefits* 660,000 2,020,000
============= =============
25 FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments comprise financial assets and financial
liabilities. Financial assets of the Group include bank balances
and cash, trade receivables and contract assets, due from related
parties and other receivables. Financial liabilities of the Group
include trade payables, due to related parties, loans and
borrowings, other payables and derivative financial instrument. The
fair values of the financial assets and liabilities are not
materially different from their carrying value unless stated
otherwise.
26 CONTINGENT LIABILITIES
US$ 30 June 2020 31 December
2019
---------------------- ------------- ------------
Letter of guarantees 34,502,890 33,572,453
============= ============
Contingent liabilities represent letters of guarantee issued in
favour of General Authority for Investment, Petrobel Group,
Egyptian General Petroleum Corporation, Petro Gulf of Suez, Suze
Abu Zenima Petroleum Company (Petro Zenima) and Association
Sonatrach - First Calgary Petroleum. The cover margin on such
guarantees amounted to USD 5,343,121 (31 December 2019: USD
5,527,168).
27 FINANCIAL INSTRUMENTS
US$ 30 June 2020 31 December
2019
----------------------------- ------------- ------------
Derivative held for trading
Interest rate swap 5,584,028 3,569,046
------------- ------------
5,584,028 3,569,046
============= ============
Total current 2,088,740 1,150,326
Total non-current 3,495,288 2,418,720
The following table shows an analysis of financial instruments
recorded at fair value by level of the fair value hierarchy:
US$ Total Level 1 Level 2 Level 3
30 June 2020
Derivative financial
Instrument
Interest rate swap (5,584,028) - (5,584,028) -
============ ======== ============ ========
31 December 2019
Derivative financial
Instrument
Interest rate swap (3,569,046) - (3,569,046) -
============ ======== ============ ========
During the period ended 30 June 2020, there were no transfers
between Level 1 and Level 2 fair value measurements, and no
transfers into and out of Level 3 at fair value measurements (31
December 2019: nil).
Interest rate swap derivatives relate to contracts taken out by
the Group with other counterparties (mainly financial institutions)
in which the Group either receives or pays a floating rate of
interest, respectively, in return for paying or receiving a fixed
rate of interest. The payment flows are usually netted against each
other, with the difference being paid by one party to the
other.
Derivative financial instruments - classified as held for
trading financial liabilities - are carried in the consolidated
statement of financial position at fair value at the total of USD
5,584,028 as of 30 June 2020. The carrying amount of these
derivatives represents the negative mark to market value of the
remaining USD 100,000,000 notional amount of the swap contract that
was originally entered into by the Group with Goldman Sachs (GS) in
2018, novated in 2019 and is still outstanding at 30 June 2020. The
remaining tenor of the GS interest rate swap contract extends from
21 November 2019 until it terminates on 22 March 2023. The total
notional amount of the GS interest rate swap before novation was
USD 241,500,000 which represented at that time the loans withdrawn
as Tranche A and B Loan under Loan 1 Syndication and Ijara loan
(note 18).
US$ 30 June 2020 31 December
2019
------------------------------------------------ ------------- ------------
Derivative financial liabilities that are
designed and effective as hedging instruments
Interest rate swap contracts 8,958,569 6,147,575
------------- ------------
Balance as at 31 December 8,958,569 6,147,575
============= ============
Total current 3,360,276 1,981,402
Total non-current 5,598,293 4,166,173
The following table shows an analysis of financial instruments
recorded at fair value by level of the fair value hierarchy:
US$ Total Level 1 Level 2 Level 3
30 June 2020
Derivative financial
Instrument
Interest rate swap (8,958,569) - (8,958,569) -
============ ======== ============ ========
31 December 2019
Derivative financial
Instrument
Interest rate swap (6,147,575) - (6,147,575) -
============ ======== ============ ========
During the year ended 31 December 2019, there were no transfers
between Level 1 and Level 2 fair value measurements, and no
transfers into and out of Level 3 at fair value measurements. (31
December 2018: Nil).
28 DIVID DISTRIBUTIONS
In the current period, dividends of USD 2,306,102 (2019: USD
1,934,284) have been paid by UPDC, one of the Group's subsidiaries,
to its non-controlling shareholders in respect of 2019 profits. The
Board of Directors of ADES International Holding Plc does not
propose a dividend to the shareholders at the Annual General
Meeting.
29 SUBSEQUENT EVENTS
Shares buy back
As at 17 September, 2020, ADES International Holding PLC has
purchased 616,292 from its own shares with an average price of USD
10.00 per share, in accordance with the shareholder authority
granted at the Company's EGM on 22 June 2020 and as part of the
buyback program announced on November 29, 2019. As at the close of
business on 21 August 2020, the total number of ordinary shares
held as treasury shares became 2,458,883 and ADES had 43,793,882
ordinary shares (including treasury shares) in issue. Therefore,
the total number of voting rights in the Company became
43,423,882.
30 COVID-19 IMPACT
Current events caused by COVID-19 and lower oil prices
The outbreak of Novel Coronavirus (COVID-19) continues to
progress and evolve. Therefore, it is challenging now, to predict
the full extent and duration of its business and economic
impact.
The extent and duration of such impacts remain uncertain and
dependent on future developments that cannot be accurately
predicted at this time, such as the transmission rate of the
coronavirus and the extent and effectiveness of containment actions
taken. These developments could impact our future financial
results, cash flows and financial condition.
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view the associated PDF.
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END
IR EADNFAENEEAA
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September 22, 2020 02:00 ET (06:00 GMT)
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