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DP World Limited (91SN)

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Monday 20 March, 2017

DP World Limited

DP World Announces Strong Financial Results

RNS Number : 8763Z
DP World Limited
20 March 2017
 

 

 

 

 

DP WORLD ANNOUNCES STRONG FINANCIAL RESULTS

Net Income of Over $1 Billion for First Time

 

Dubai, United Arab Emirates, 20 March, 2017. Global trade enabler DP World today announces strong financial results from its global portfolio for the twelve months ending 31 December 2016. On a reported basis, revenue grew 4.9% and adjusted EBITDA increased 17.4% with adjusted EBITDA margin of 54.4%, delivering profit attributable to owners of the Company, before separately disclosed items1, of $1,127 million, up 27.6%, and EPS of 135.7 US cents. On a like-for-like basis, revenue grew 1.3%, adjusted EBITDA increased by 6.6% with adjusted EBITDA margin of 52.6%, and attributable earnings increased 6.2%.

 

Results before separately disclosed items1 unless otherwise stated

2016

2015

As Reported % change

Like-for- like at constant currency % change2

USD million





Gross throughput3 (TEU '000)

63,658

61,701

3.2%

2.2%

Consolidated throughput4 (TEU '000)

29,240

29,110

0.4%

(1.6%)

Revenue

4,163

3,968

4.9%

1.3%

Share of profit from equity-accounted investees

149

53

183.5%

30.5%

Adjusted EBITDA5

2,263

1,928

17.4%

6.6%

Adjusted EBITDA margin6

54.4%

48.6%

-

52.6%7

Profit for the period

1,260

970

29.9%

9.0%

Profit for the period attributable to owners of the Company

1,127

883

27.6%

6.2%

Profit for the period attributable to owners of the Company after separately disclosed items

1,024

883

16.0%

-

Basic Earnings per share attributable to owners of the Company (US cents)

135.7

106.3

27.6%

6.2%

Ordinary Dividend per share (US Cents)

38.0

30.0

26.7%

-

 

 

Results Highlights

 

Ø Revenue of $4,163 million

§ Revenue growth of 4.9% supported by full year contribution of Jebel Ali Free Zone (UAE) and Prince Rupert (Canada).

§ Like-for-like revenue increased by 1.3% driven by a 2.3% increase in containerized revenue.

§ Volume growth of 0.4% despite challenging markets.

§ Containerized revenue per TEU (twenty-foot equivalent unit) grew 4.0% and total revenue per TEU by 3.0% on a like-for-like basis.

§ Total containerized revenue grew by 3.8% on a reported basis and 2.3% on a like-for-like basis as containerized Other revenue was up 6.1% on a reported basis and 5.1% on a like-for-like basis. While non-container revenue decreased by 1.1% on a like-for-like basis and increased by 7.5% on a reported basis.

 
____________ 
1 Before separately disclosed items (BSDI) primarily excludes non-recurring items. DP World reported separately disclosed items of -$104.4 million.
2 Like-for-like at constant currency is without the addition of new capacity at Yarimca (Turkey), Stuttgart (Germany), Antwerp Inland (Belgium), Prince Rupert (Canada) and Jebel Ali Free Zone (UAE). 
3 Gross throughput is throughput from all consolidated terminals plus equity-accounted investees.
4 Consolidated throughput is throughput from all terminals where the group has control as per IFRS.
5 Adjusted EBITDA is Earnings before Interest, Tax, Depreciation & Amortisation including share of profit from equity-accounted investees before separately disclosed items.
6 The adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenue, including our share of profit from equity-accounted investees.

7 Like-for-like adjusted EBITDA margin.

 

 

 

Ø Adjusted EBITDA of $2,263 million and adjusted EBITDA margin of 54.4%

§ Adjusted EBITDA margin for the full year reached a new high of 54.4% reflecting the Jebel Ali Free Zone acquisition and increased contribution from other higher margin locations. Like-for-like adjusted EBITDA margin was at 52.6%.

 

Ø Profit for the period attributable to owners of the Company of $1,127 million

§ Strong adjusted EBITDA growth resulted in a 27.6% increase in profit attributable to owners of the Company before separately disclosed items on a reported basis and 6.2% growth on a like-for-like basis at constant currency.

 

Ø Strong cash generation, robust balance sheet and credit rating upgrade

§ Cash from operating activities amounted to $2,002 million up from $1,928 million in 2015.

§ Free cash flow (post cash tax maintenance capital expenditure and pre dividends) amounted to $1,674 million against $1,595 million in 2015.

§ Leverage (Net Debt to adjusted EBITDA) decreased to 2.8 times from 3.2 times in 2015.

§ DP World was upgraded by both rating agencies Fitch and Moody's to BBB from BBB- and Baa2 from Baa3 respectively with stable outlook.

 

Ø Improvement in return on capital employed

§ Return on capital employed8 (ROCE) improved by 160 basis points to 9.5% in 2016 from 7.9% in 2015.

 

Ø Reduced financing cost and lowering refinancing risk

§ Successfully raised $1.2 billion in a new 7-year Sukuk transaction at significantly improved terms, refinancing $1.1 billion of the existing 2017 Sukuk through a tender offer and extending the debt maturity profile. Furthermore, we raised £650 million 20- and 30-year multi tranche term financing placed with pension funds, insurance companies and financial institutions for London Gateway Port, and $CAD 603 million 7-year bank loan for the Canadian business. This further extends the debt maturity profile and reduces the refinancing risk of DP World.

 

Ø Total dividend per share increased by 26.7% to 38 US cents

§ Ordinary dividend increased by 26.7% to 38 US cents to reflect growth in 2016 earnings.

Ø Continued investment in high quality long-term assets to drive long-term profitable growth

§ Capital expenditure of $1,298 million invested across the portfolio during the year.

§ By the end of 2016, gross global capacity was at 85 million TEU, an increase of approximately 15 million TEU since 2012, and we expect over 100 million TEU of gross capacity by 2020, subject to market demand.

§ We expect capital expenditure in 2017 to be $1.2 billion with investment planned into Jebel Ali (UAE), Prince Rupert (Canada), Berbera (Somaliland), Dakar (Senegal) and London Gateway (UK).

 

Ø Investment partnership and further consolidation in our portfolio

§ Created $3.7 billion investment platform in partnership with CDPQ9 and DP World holding 55% share and CDPQ the remaining 45% to invest in ports and terminals globally outside the UAE. Furthermore, DP World seeded the fund with the Canadian container terminals, Vancouver and Prince Rupert, with CDPQ acquiring a 45% stake of the assets for $640 million10.

§ Acquired an additional 23.94% stake in Pusan Newport Company Limited (PNC) in South Korea to increase our holding to 66.03% ownership, thus consolidating Pusan Port in our portfolio.

 

____________ 
Return on capital employed is EBIT (earnings before interest and taxation) before separately disclosed items as a percentage of total assets less current liabilities.
Caisse de dépôt et placement du Québec (CDPQ) is one of North America’s largest pension fund managers.
10 The transaction closed in January 2017 so will not be reflected in 2016 accounts.

   

 

 

 

 

 

DP World Group Chairman and CEO, Sultan Ahmed Bin Sulayem, commented:

 

"We are pleased to announce another set of strong financial results for 2016, as we delivered earnings in excess of $1 billion and above 50% EBITDA margins for the full year for the first time. Encouragingly, our volumes have continued to grow ahead of the market with gross volumes growing 3.2% vs. Drewry full year market estimate of 1.3%. This is pleasing given the significant challenges parts of our portfolio have faced, and once again demonstrates the resilient nature of our diversified portfolio. Disciplined investment throughout the economic cycle has been one of the keys to delivering consistent growth and in 2016, we invested $1,298 million across our portfolio in markets with strong demand and supply dynamics.

 

"While 2017 is expected to be another challenging year for global trade, we have made an encouraging start to the year and we expect to continue to deliver ahead-of-market volume growth. Our aim is to continue our disciplined approach to capital allocation in markets with strong growth potential while adding complementary or related services to further diversify and strengthen our business.

 

"The Board of DP World recommends increasing the dividend by 26.7% to $315.4 million, or 38.0 US cents per share, reflecting the strong earnings growth in the year. The Board is confident of the Company's ability to continue to generate cash and support our future growth whilst maintaining a consistent dividend payout.

 

"Our significant cash generation and investment partnerships leave us with a strong balance sheet and flexibility to capitalise on the significant growth opportunities in the industry. Overall, we continue to believe that a portfolio which has a 70% exposure to origin and destination cargo and 75% exposure to faster growing markets will enable us to deliver enhanced shareholder value over the long term."

 

- END -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Enquiries

 

Redwan Ahmed

DP World Limited

Mobile: +971 50 5541557

Direct: +971 4 8080842

Redwan.ahmed@dpworld.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lie-Tin Wu

DP World Limited

Mobile: +971 50 4220405

Direct: +971 4 8080929

[email protected]


 

 

 

12pm UAE, 8am UK Conference Call 

 

1)  Conference call for analysts and investors hosted by Redwan Ahmed

 

2)  A playback of the call will be available shortly after the 12pm conference call concludes.  For the dial in details and playback details please contact [email protected].

 

The presentation accompanying these conference calls will be available on DP World's website within the investor centre. www.dpworld.com from approximately 9am UAE time this morning.

 

 

Forward-Looking Statements

 

This document contains certain "forward-looking" statements reflecting, among other things, current views on our markets, activities and prospects. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that may or may not occur and which may be beyond DP World's ability to control or predict (such as changing political, economic or market circumstances). Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of DP World speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Except to the extent required by law, DP World does not undertake to update or revise forward-looking statements to reflect any changes in DP World's expectations with regard thereto or any changes in information, events, conditions or circumstances on which any such statement is based.



 

 

 

 

 

 

 

 

 

 

Group Chairman and CEO Statement

 

A Business Model that Continues to Deliver Despite Challenging Markets

 

Over the years, our portfolio has been accustomed to outperforming in both benign and challenging market conditions but to deliver ahead-of-market growth once again in 2016 has been particularly pleasing given the challenges our industry has faced last year. During the same period, we have seen many in our industry come under significant financial pressure, which has resulted in some of our peers re-evaluating their business model or strategy.

 

In contrast, our financial performance has remained strong as attributable earnings increased by 27.6% year-on-year to $1,127 million. This is in addition to the 30.7% growth in earnings we delivered in 2015, while our EBITDA margins are well above 50%.

 

Overall, our resilient volume performance combined with the strong financial performance once again reinforces our view that operating a diversified portfolio with a focus on faster growing markets, and origin and destination cargo, will deliver superior earnings growth and enhance shareholder value.

 

Global Trade to Remain Resilient

Global trade has remained robust through the various economic cycles of high and low inflationary periods, volatile commodity prices and changing political climates and we expect it to remain resilient even in an era, where there is much discussion about protectionism and increasing trade barriers. In fact, in recent years the container industry has faced significant pressures such as currency volatility, weak commodity prices and geopolitical issues but it is worth noting that despite these challenges, overall volumes have continued to grow and expectations for 2017 are for further growth albeit in low single digits. 

 

In difficult economic times, it is important to constantly review your portfolio and business model to ensure that it can withstand the various challenges and given the consistent performance of our assets, we believe that we are on the right track. Investing wisely throughout the cycle is key to delivering consistent growth and in 2016, we invested $1,298 million in capex across our portfolio, and our expansionary capex has been targeted at select key markets, typically characterized by a long term growth opportunity and attractive demand and supply dynamics.

 

In addition, in recent years, we have invested in various beyond the gate logistic businesses such as Jebel Ali Free Zone (JAFZ) and inland terminals. These complementary businesses have not only delivered solid financial returns but have also improved the quality of our revenues. Our aim is to continue to add complementary or related services at both existing and new locations where possible in order to further diversify and strengthen our business.

 

Industry Changes Offers Opportunities

Our industry is going through many changes and as always a time of change offers risk and opportunity and, at DP World, we intend to stay on the front-foot to ensure that we stay ahead of the game. For example, over the last decade, we have seen a significant increase in vessel sizes with greater deployment of ultra-large vessels but our early investment in deep-water capacity allowed us to benefit from this development. More recently, we have seen greater co-operation between our customers to form shipping alliances, which is designed to manage the over-capacity in the shipping sector, and is a positive development for the health of the industry. Our continued focus on delivering operational excellence in addition to investing in relevant capacity should continue to ensure that we remain the port of choice across geographies.  

 

Recent Investments to Deliver Growth

2014 and 2015 were years of sizeable investment including significant M&A transactions but our earnings growth and return on capital employed (ROCE) improvement to 9.5% in 2016 compared to 7.9% in 2015 demonstrating that our investments are delivering. In the near term, we expect further improvement as our recent investments in London Gateway (UK), Yarimca (Turkey), Rotterdam (Netherlands), Embraport (Brazil) and JNP Mumbai (India) continue to ramp up. In fact, at London Gateway, we recently won our first Asia-Europe service which is a major development and we continue to make strong progress in the development of our 859,000 sqm logistics park.  

 

Opportunity Landscape Is Significant

We believe the medium-long term growth potential of the port and terminal sector remains significant and challenging markets can often be a time of opportunity but it is important for us to have the ability to capitalise should attractive assets become available. At DP World, we continue to review our finances to ensure flexibility, and during the year, we successfully refinanced our 2017 Sukuk, which reduced refinancing risk while also providing new capital at significantly improved terms. Furthermore, we created a $3.7 billion investment platform in partnership with the Canadian pension fund CDPQ to invest in global ports and terminals and monetised 45% of our two Canadian container ports - Vancouver and Prince Rupert, for $640 million.

 

These actions leave us with a strong balance sheet, and going into 2017, with a net leverage of below 3 times, we are well placed to take advantage of any opportunities should they arise at attractive prices.

 

Capacity

Globally we added approximately 5 million TEU of new gross capacity and 2.2 million TEU of consolidated capacity during 2016 to take our total gross and consolidated capacity to 84.6 million and 42.4 million TEU respectively. By the end of 2017 we anticipate that we will have approximately 89 million TEU of capacity across our portfolio and our aim is to be operating over 100 million TEU of capacity by 2020, subject to demand. For 2017, we look forward to adding further capacity including Jebel Ali (UAE), Prince Rupert (Canada), Berbera (Somaliland), Qingdao (China), Dakar (Senegal) and London Gateway (UK).

 

ROCE

Return on capital employed (ROCE) is a key measures of how well our investment strategy is delivering to shareholders and we are pleased to report that in 2016 our ROCE improved by 160 basis points to 9.5% from 7.9% in 2015, and we expect our ROCE to continue to increase as our portfolio matures. The average life of our port concession currently stands at 38 years.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group Chief Financial Officer's Review

 

Financially, it has been another successful year for DP World, as we have delivered a strong set of results in 2016 with profit attributable to owners of the Company growing 27.6% to $1,127 million. Our adjusted EBITDA was $2,263 million, while adjusted EBITDA margins reached a new high of 54.4%, reaching our medium term target of 50%+ adjusted EBITDA margins ahead of target. Reported revenue grew by 4.9% to $4,163 million.

 

On a like-for-like basis, 2016 revenues grew by 1.3%, driven by 2.3% containerized revenue growth. Non-container revenue declined by 1.1% on a like-for-like basis following a strong performance in 2015. This resulted in like-for-like adjusted EBITDA growth of 6.6%; like-for-like adjusted EBITDA margin of 52.6% and like-for-like EPS growth of 6.2%.

 

Revenue growth continues to outperform volume growth which illustrates that our portfolio continues deliver pricing power even in challenging markets. 


Middle East, Europe and Africa

Results before separately disclosed items

2016

2015

% change

Like-for-like at constant currency % change

USD million





Consolidated throughput (TEU '000)

21,279

21,556

(1.3%)

(1.9%)

Revenue

3,071

2,911

5.5%

1.9%

Share of profit from equity-accounted investees

18

10

86.1%

37.4%

Adjusted EBITDA

1,791

1,612

11.2%

5.6%

Adjusted EBITDA margin

58.3%

55.4%

-

57.7%11

 

Market conditions in the Middle East, Europe and Africa region were mixed. Growth within our portfolio outside of the UAE was strong with Europe continuing to outperform, mainly driven by the ramp up at London Gateway. Volumes in the UAE were down by 5.3% at 14.8 million TEU in 2016, reflecting a reduction in lower margin cargo, which decelerated in the fourth quarter with volumes marginally down 0.7% year-on-year. Jebel Ali Free Zone continues to perform in line with expectations even in these more challenging markets.  Overall, revenue in the region grew 5.5% to $3,071 million on a reported basis, aided by the acquisition of Jebel Ali Free Zone. Like-for-like containerized revenue per TEU was up by 4.5% and total revenue per TEU was up by 3.9%.

 

Adjusted EBITDA was $1,791 million, 11.2% ahead of the same period last year mostly due to the full year contribution of the Jebel Ali Free Zone, while adjusted EBITDA margin rose to 58.3%. Like-for-like revenue and adjusted EBITDA growth on prior year at constant currency was 1.9% and 5.6% respectively. Like-for-like adjusted EBITDA margins stood at 57.7%.

 

We invested $1,058 million in the region during the year. Investment was focused across the Middle East and Europe including Jebel Ali (UAE), Jebel Ali Free Zone (UAE), London Gateway (UK) and Yarimca (Turkey). 

 

___________
11 Like-for-like adjusted EBITDA margin.
 

 

 

Asia Pacific and Indian Subcontinent

Results before separately disclosed items

2016

2015

% change

Like-for-like at constant currency % change

USD million





Consolidated throughput (TEU '000)

4,957

4,870

1.8%

1.8%

Revenue

433

414

4.6%

8.3%

Share of profit from equity-accounted investees

125

111

12.7%

17.7%

Adjusted EBITDA

317

281

12.6%

17.2%

Adjusted EBITDA margin

73.0%

67.8%

-

73.7%12


Markets conditions in the Asia Pacific and Indian Subcontinent region were generally positive. Volume growth of 1.8% was driven by the Indian Subcontinent terminals as the region benefited from new capacity in Mumbai (India) and a favourable trading environment.

 

Revenue growth of 4.6% to $433 million on a reported basis and 8.3% on a like-for-like basis was stronger than volume growth due to an improvement in containerized revenue per TEU, which grew 9.6% on a like-for-like basis. Our share of profit from equity-accounted investees rose 12.7% to $125 million mainly due to strong performance in China and South Korea.  

 

Adjusted EBITDA of $317 million was 12.6% higher than the same period last year, while the adjusted EBITDA margin increased to 73.0%. Like-for-like growth was stronger at 17.2% as currency fluctuations adversely impacted top line growth.

 

Capital expenditure in this region during the year was $81 million, mainly focused on the capacity expansion in Mumbai (India).

 

Australia and Americas

Reported results before separately disclosed items

2016

2015

% change

Like-for-like at constant currency % change

USD million





Consolidated throughput (TEU '000)

3,003

2,684

11.9%

(6.0%)

Revenue

659

642

2.6%

(6.1%)

Share of profit from equity-accounted investees

6.4

(68.0)

109.4%

31.7%

Adjusted EBITDA

293

190

54.5%

6.0%

Adjusted EBITDA margin

44.5%

29.5%

-

41.4%13

 

Market conditions in the Australia and Americas region have been challenging. Volatile currency and weaker commodity prices led to softer economic growth in this region. Reported volumes grew by 11.9%, benefiting from the full year contribution of Prince Rupert (Canada). Revenues grew by 2.6% to $659 million. Profit from equity-accounted investees was $6.4 million, with the year-on-year improvement driven by foreign exchange gains in Brazil.  

 

Adjusted EBITDA was $293 million, 54.5% ahead of the prior year mainly due to the acquisition of Prince Rupert, foreign exchange gains in Brazil and improved performance in equity-accounted investees. However, like-for-like throughput volumes were down by 6.0%, like-for-like total revenue growth at constant currency was down by 6.1%, but like-for-like adjusted EBITDA improved by 6.0% on the prior period, reflecting strong cost controls.

 

We invested $156 million capital expenditure in our terminals across this region during the year mainly focused in Prince Rupert (Canada).

 

____________ 
12 Like-for-like adjusted EBITDA margin.
13 Like-for-like adjusted EBITDA margin.

 

 

Cash Flow and Balance Sheet

It has been a busy year for refinancing as we successfully refinanced $1.1 billion of our 2017 Sukuk with a new 7-year 3.908% Sukuk, which extended our debt maturity profile while also providing new capital at significantly improved terms. Furthermore, we raised £650 million 20 and 30-year multi tranche term financing for London Gateway Port, which was placed with pension funds, insurance companies and financial institutions, and $CAD 603 million 7-year bank loan for the Canadian business. This further extends the debt maturity profile and reduces the refinancing risk of DP World. The credit agencies Fitch and Moody's also recognised the strength and resilience of our business and upgraded our long-term issuer rating to BBB from BBB- and Baa2 from Baa3 respectively with stable outlook.

 

Cash generation remained strong with cash from operations standing at $2,002 million for 2016. Our capital expenditure reached $1,298 million as we delivered new capacity in Jebel Ali (UAE), London Gateway (UK), Yarimca (Turkey), Antwerp (Belgium) and Mumbai (India). Gross debt fell slightly to $7,618 in 2016 from $7,670 million at 31 December 2015. Net debt was slightly higher at $6,319 million in 2016 compared to $6,234 million in 2015 as the cash on the balance sheet at 31 December 2016 of $1,299 million was lower due to capital expenditure.

 

Our year-end balance sheet shows leverage (net debt to adjusted EBITDA) decreased to 2.8 times from 3.2 times at 31 December 2015. Overall, the balance sheet remains strong with ongoing strong cash generation and we have plenty of headroom and flexibility to add to our portfolio should favourable assets become available at attractive prices.

 

Capital Expenditure

Capital expenditure in 2016 was $1,298 million, with maintenance capital expenditure of $170 million. The total spend was in line with our guidance of $1,200-1,400 million as we maintain our disciplined approach to deploying capital and postponed Terminal 3 expansion at Jebel Ali (UAE). We expect 2017 capital expenditure to be around $1,200 million and we look forward to adding further capacity at Jebel Ali (UAE), Prince Rupert (Canada), Berbera (Somaliland), Dakar (Senegal) and London Gateway (UK).

 

 

 

 

 

 

 

 

 

 

 

 

 

Sultan Bin Sulayem

Group Chairman and Chief Executive Officer           

Yuvraj Narayan

Group Chief Financial Officer

 

 

 

 

 

 

 

 

 

                       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DP World Limited and its subsidiaries

 

Consolidated financial statements

31 December 2016

 

 

                                               

 

 

 



DP World Limited and its subsidiaries

 

Consolidated financial statements

31 December 2016

 

Contents

 

Independent auditors' report              

         

Consolidated financial statements

Consolidated statement of profit or loss

Consolidated statement of other comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

 

Notes to consolidated financial statements

 

Basis of preparation and accounting policies

1. Corporate information

2. Basis of preparation of the consolidated financial statements

3. Significant accounting policies

 

Performance for the year

4. Segment information

5. Revenue

6. Profit for the year

7. Finance income and costs

8. Income tax

9. Separately disclosed items

10. Dividends

11. Earnings per share

 

Assets

12. Property, plant and equipment

13. Investment properties

14. Intangible assets and goodwill

15. Impairment testing

16. Investment in equity-accounted investees

17. Accounts receivable and prepayments

18. Cash and cash equivalents

 

 

 

Liabilities

19.Employees' end of service benefits

20. Pension and post-employment benefits

21. Accounts payable and accruals

 

Group composition

22. Non-controlling interests

23. Business combinations

24. Significant group entities

25. Related party transactions

 

Risk

26. Financial risk management

 

Capital structure

27. Share capital

28. Reserves

29. Interest bearing loans and borrowings

30. Capital management

 

Other information

31. Operating leases

32. Capital commitments

33.  Contingencies

34.  Subsequent events

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

Independent auditors' report

 

To the Shareholders of DP World Limited

 

Report on the Audit of the Consolidated Financial Statements

 

Opinion

 

We have audited the consolidated financial statements of DP World Limited ("the Company") and its subsidiaries ("the Group"), which comprise the consolidated statement of financial position as at 31 December 2016, the consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2016, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and the applicable provisions of the Companies Law pursuant to DIFC Law No. 2 of 2009.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Dubai International Financial Centre and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 


Key audit matter

Carrying value of goodwill and port concession rights

Refer to notes 3 and 15 of the consolidated financial statements

The Group has significant goodwill and port concession rights arising from the acquisition of businesses. The Group's annual impairment testing on goodwill and port concession rights with indefinite useful lives requires the Group to identify Cash Generating Units (CGUs) in accordance with the requirements of IAS 36 - Impairment of Assets. Impairment testing is then performed using free cash flow projections based on three year financial budgets approved by the Board and five year future forecasts estimated by the Group. Due to the inherent uncertainty involved in forecasting and discounting future cash flows, which forms the basis of the assessment of recoverability, along with the judgemental aspects of the assessment of appropriate CGUs, these are the key areas that our audit concentrated on. 

 

Our response to address the key audit matter

 

Our procedures included:

 

In respect of the assessment of CGUs: We challenged the assessment of CGUs and considered the operating and management structure with reference to our understanding of the business.

 

In respect of the cash flows: We considered the Group's procedures used to develop the forecasts and the principles and integrity of the Group's discounted cash flow model and re-performed the calculations of the model results to test their accuracy. To challenge the reasonableness of those cash flows, we assessed the historical accuracy of the Group's forecasting and corroborated the forecasts with reference to publicly available information and other evidence that has been made available during the course of the audit. We conducted our own assessments to challenge other key inputs, such as the projected growth rate and perpetuity rate.

 

In respect of the discount rates: We compared the Group's assumptions to externally-derived data (for example, bond yields and inflation statistics) where appropriate. We used our own valuation specialists to assist us in assessing the adequacy of the significant assumptions used in arriving at the discount rates.

 

In respect of the sensitivity to key assumptions: We performed sensitivity analysis of discount rates and forecast cash flows as well as break-even analysis on the valuations of the CGUs' recoverable amounts. We also considered CGU specific and external market factors to assess reasonableness of management assumptions.

 

We assessed the adequacy of the Group's disclosure in these respects.

 

Key audit matter

Acquisition accounting

Refer to notes 3 and 23 of the consolidated financial statements

The Group has acquired an additional stake in Pusan Newport Company Limited during the year. The accounting involves estimating the fair value of the assets and liabilities at the acquisition date and the identification and valuation of port concession rights and goodwill.



 

Key audit matter (continued)

Acquisition accounting (continued)

Significant judgement is involved in relation to the assumptions used in the valuation and purchase price allocation process.

Due to the inherent uncertainty involved in discounting future cash flows, there is a risk that these assumptions are inappropriate. Furthermore, an assessment is required to be made for an appropriate classification of an investment as a subsidiary, joint venture or associate based on whether the Group has determined to have control, joint control or significant influence respectively.

Our response to address the key audit matter

Our audit procedures included:

Inspection of the key terms in the share purchase agreement to assess the appropriate control classification of the investment as per IFRS 10 - Consolidated Financial Statements. We assessed the accounting entries used to record the acquisition, the assets and liabilities at the acquisition date of the acquired entity and the fair value adjustments made thereto. We also challenged the Group's critical assumptions in relation to the identification and recognition of those assets and liabilities and the associated fair values by involving our valuation specialists to assess the reasonableness of the key assumptions used in the fair value and purchase price allocation as determined by the Group. We considered whether the resulting goodwill balances, step ups (difference between fair value and carrying value of assets and liabilities) and the impact of profit or loss appeared reasonable and assessed the appropriateness of the disclosures made.

Key audit matter

Litigation and claims

Refer to notes 3 and 33 of the consolidated financial statements

The Group enters into individually significant contracts which may extend to many years and are often directly or indirectly associated with governments. As a result, the Group is subject to a number of material ongoing litigation actions and claims, therefore, the recognition and measurement of provisions and the measurement and disclosure of contingent liabilities in respect of litigation and claims requires significant judgement and accordingly is a key area of focus in our audit.

Our response to address the key audit matter

Our procedures included:

Evaluation of the Group's policies, procedures and controls in relation to litigations, claims and provision assessments. Furthermore, we obtained representations from the Group's legal counsel, made independent enquiries and obtained confirmations from external lawyers to understand the legal positions and exposure to the Group.

 

The outcome of our evaluation was used as a basis to determine the adequacy of the level of provisioning and disclosure in the consolidated financial statements.



 

Key audit matter

Taxation provisions

Refer to notes 3 and 8 of the consolidated financial statements

The Group operates in a number of tax jurisdictions whereby the Group has to estimate the tax effect of applying local corporation and indirect tax legislation which can be complex and involve cross border transactions, including transfer pricing arrangements. 

Where the precise nature of the tax legislation is unclear, the Group has to make reasonable estimates of the likely tax charge that will arise.

Some of the Group's uncertain tax positions are at various stages of resolution, from preliminary discussions with tax authorities through to tax tribunal or court proceedings where the matters can take a number of years to resolve. Tax provisions have been estimated by the Group with respect to the tax exposures identified but there is the potential risk that the eventual resolution of a matter with tax authorities is at an amount materially different to the provision recognised.

Our response to address the key audit matter

Our procedures included:

We, together with our tax specialists, considered any large or unusual items affecting the effective tax rate and whether or not any current year items would result in an increased or reduced provision.

In considering the judgements and estimates of tax provisions, we used our tax specialists to assess the Group's tax positions including assessing correspondence with the relevant tax authorities. We challenged the positions taken by the Group based on our knowledge and experience of the industry in which the Group operates specifically relating to the adequacy of provisions and disclosure within the consolidated financial statements.

Key audit matter

Pensions

Refer to notes 3 and 20 of the consolidated financial statements

The Group operates a number of defined benefit pension schemes. The valuation of the pension deficit requires significant levels of judgement and technical expertise in choosing the appropriate assumptions. Changes in a number of the key assumptions including salary increases, inflation, discount rates and mortality assumptions can have a material impact on the calculation of the pension position. As a result of the size of the pension scheme deficit and the judgements inherent in the actuarial assumptions involved in the valuation of the pension benefit obligations, we considered this to be an area of focus.

Our response to address the key audit matter

Our procedures included:

The Group engages an independent actuary to assist them in calculating the appropriate pension scheme position. We obtained the actuary's report and with the assistance of our pension specialists assessed the discount and inflation rates used in calculating the pension deficit to our internally developed benchmarks, which are based on externally available data to assess whether these assumptions were within our expected range. We compared the mortality assumption to national and industry averages to assess that these were reasonable.



 

Key audit matter (continued)

Pensions (continued)

Our response to address the key audit matter (continued)

Our procedures included (continued):

We also compared the assumptions with those used in previous years, to assess that the methodology used in arriving at the assumptions year on year was consistent.

We agreed the material assets of the scheme to third party confirmations and where applicable, recalculated asset valuations based on the quoted prices.

We assessed the adequacy of the disclosures in this area.

Other Information

Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditors' report thereon. The annual report is expected to be made available to us after the date of this auditors' report.

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

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take appropriate actions in accordance with ISAs.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and their preparation in compliance with the applicable provisions of the Companies Law pursuant to DIFC Law No. 2 of 2009 and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

 



 

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

 

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the planning and performance of audit. We also:

 

§  Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

§  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

 

§  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

§  Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.

 

§   Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.



 

 

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements (continued)

 

§  Obtain sufficient appropriate audit evidence regarding the financial information of the entities and business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

 

 

 

 

KPMG LLP

Rohit Rajvanshi

Dubai, United Arab Emirates

 

 

20 March 2017

 

                                       


DP World Limited and its subsidiaries

 

 Consolidated statement of profit or loss 



Year ended 31 December 2016

Year ended 31 December 2015


 

 

Note

Before separately

disclosed items

Separately

disclosed items

(Note 9)

Total

Before separately

disclosed items

Separately

disclosed items

(Note 9)

Total



USD'000

USD'000

USD'000

USD'000

USD'000

USD'000









Revenue

5

4,163,325

68,243

4,231,568

3,967,739

75,171

4,042,910

Cost of sales


(2,010,490)

(68,243)

(2,078,733)

(2,009,145)

(75,171)

(2,084,316)

Gross profit


2,152,835

-

2,152,835

1,958,594

-

1,958,594









General and administrative expenses


(628,411)

(776)

(629,187)

(590,284)

(653)

(590,937)

Other income


49,301

3,878

53,179

26,979

16,867

43,846

Loss on disposal and change in ownership of business

9

(2,966)

(12,524)

(15,490)

-

(610)

(610)

Share of profit/ (loss) from equity-accounted investees (net of tax)

16

 149,435

(2,957)

146,478

52,702

-

52,702

Results from operating activities


1,720,194

(12,379)

1,707,815

1,447,991

15,604

1,463,595









Finance income

7

100,247

47,462

147,709

104,969

9,705

114,674

Finance costs

7

(438,357)

(139,521)

(577,878)

(492,087)

(23,352)

 (515,439)

Net finance costs


(338,110)

(92,059)

(430,169)

(387,118)

(13,647)

(400,765)









Profit before tax


1,382,084

(104,438)

1,277,646

1,060,873

1,957

1,062,830

Income tax expense

8

(122,579)

-

(122,579)

(90,988)

-

(90,988)









Profit for the year

6

1,259,505

(104,438)

1,155,067

969,885

1,957

971,842









Profit attributable to:








Owners of the Company


1,126,554

(102,300)

1,024,254

882,576

355

882,931

Non-controlling interests


132,951

(2,138)

130,813

87,309

1,602

88,911



1,259,505

(104,438)

1,155,067

969,885

1,957

971,842

Earnings per share








Basic earnings per share - US cents

11

135.73


123.40

106.33


106.38

Diluted earnings per share - US cents

11

132.11


117.16

103.96


105.87

 

The accompanying notes 1 to 34 form an integral part of these consolidated financial statements.


 

DP World Limited and its subsidiaries

 

Consolidated statement of other comprehensive income



2016

2015


Note

USD'000

USD'000





Profit for the year


1,155,067

971,842





Other comprehensive income (OCI)








Items that are or may be reclassified to profit or loss:




Foreign exchange translation differences - foreign operations*


(586,792)

(541,752)

Foreign exchange translation differences recycled to profit or loss due to change in ownership resulting in control


 

48,913

 

-

Net change in fair value of available-for-sale financial assets


5,176

(283)

Share of other comprehensive income of equity-accounted investees

16

3,416

(211)

Cash flow hedges - effective portion of changes in fair value


(21,178)

13,532

Related tax on fair value of cash flow hedges


3,170

(4,646)



Items that will never be reclassified to profit or loss:




Re-measurements of post-employment benefit obligations**

20

(204,987)

(5,990)

Related tax


5,699

(1,030)





Other comprehensive income for the year, net of tax


(746,583)

(540,380)





Total comprehensive income for the year


408,484

431,462





Total comprehensive income attributable to:




Owners of the Company


282,472 

348,162

Non-controlling interests


126,012

83,300

 

* A significant portion of this includes foreign exchange translation differences arising from the translation of goodwill and purchase price adjustments which are denominated in foreign currencies at the Group level. The translation differences arising on account of translation of the financial statements of foreign operations whose functional currencies are different from that of the Group's presentation currency are also reflected here. There are no differences on translation from functional to presentation currency as the Company's functional currency is pegged to the presentation currency.

 

** This includes reapportionment of pension fund deficit contribution from a related party and increase in pension actuarial loss on account of the decrease in discount rate at the reporting date.

 

The accompanying notes 1 to 34 form an integral part of these consolidated financial statements.



 

DP World Limited and its subsidiaries

 

Consolidated statement of financial position



31 December 2016

31 December 2015


Note

USD'000

USD'000

Assets




Non-current assets




Property, plant and equipment

12

7,522,077

       6,969,126

Investment properties

13

1,280,325

       1,177,229

Intangible assets and goodwill

14

7,289,138

7,134,917

Investment in equity-accounted investees

16

1,951,658

       2,408,321

Other investments

 

60,644

            68,736

Accounts receivable and prepayments

17

428,627

249,056

Total non-current assets

 

18,532,469

18,007,385

Current assets

 



Inventories

 

79,124

61,520

Accounts receivable and prepayments

17

793,345

753,627

Cash and cash equivalents

18

1,299,391

1,436,595

Total current assets

 

2,171,860

2,251,742

Total assets


20,704,329

20,259,127

Equity




Share capital

27

1,660,000

1,660,000

Share premium


2,472,655

2,472,655

Shareholders' reserve


2,000,000

2,000,000

Retained earnings


5,495,181

4,722,382

Translation reserve


(2,124,021)

(1,593,342)

Other reserves

28

(705,964)

(494,861)

Total equity attributable to equity holders of the Company


 8,797,851

8,766,834

Non-controlling interests

22

721,834

367,764

Total equity


9,519,685

9,134,598

Liabilities




Non-current liabilities




Interest bearing loans and borrowings

29

6,874,777

7,527,231

Accounts payable and accruals

21

392,127

463,057

Deferred tax liabilities

8

945,257

940,636

Employees' end of service benefits

19

112,594

97,762

Pension and post-employment benefits

20

314,691

180,887

Total non-current liabilities


8,639,446

9,209,573

Current liabilities




Interest bearing loans and borrowings

29

743,482

143,047

Accounts payable and accruals

21

1,663,809

1,614,580

Income tax liabilities

8

129,722

147,320

Pension and post-employment benefits

20

8,185

10,009

Total current liabilities


2,545,198

1,914,956

Total liabilities


11,184,644

11,124,529





Total equity and liabilities


20,704,329

20,259,127

 

The accompanying notes 1 to 34 form an integral part of these consolidated financial statements.

The consolidated financial statements were authorised for issue on 20 March 2017.

 

 

 

..........................................................                                                                      ..........................................................

Sultan Ahmed Bin Sulayem                                                                                Yuvraj Narayan

Chairman and Chief Executive Officer                                                              Chief Financial Officer


 

DP World Limited and its subsidiaries

 

Consolidated statement of changes in equity

Attributable to equity holders of the Company

 


Share capital and premium

Shareholders'

reserve

Retained Earnings

Translation

reserve

Other

reserves

Total

Non-controlling

interests

Total equity


USD'000

USD'000

USD'000

USD'000

  USD'000

USD'000

USD'000

USD'000










Balance as at 1 January 2015

4,132,655

2,000,000

3,918,177

(1,061,117)

(492,317)

8,497,398

529,262

9,026,660

Profit for the 
period

-

-

882,931


-

882,931

88,911

971,842

Other 
comprehensive income, net of tax

-

-

-

(532,225)

(2,544)

(534,769)

(5,611)

(540,380)

Transactions with owners, 
recognised 
directly in

equity









Dividends paid 
(refer to note 10)

-

-

(195,050)

-

-

(195,050)

-

(195,050)

Changes in ownership 
interests

in subsidiaries
without change 
of control









Acquisition of 
non-controlling interests

without change 
in control

 

-

 

-

 

116,324

 

-

 

-

 

116,324

 

(241,903)

 

(125,579)

Transactions with non-controlling interests,

recognised 
directly in equity









Dividends paid

-

-

-

-

-

-

(11,845)

(11,845)

Acquisition of subsidiary with 
non-controlling interests

-

-

-

-

-

-

8,950

8,950

Balance as at 31 December 2015

4,132,655

2,000,000

4,722,382

(1,593,342)

(494,861)

8,766,834

367,764

9,134,598

Profit for the 
period

-

-

1,024,254

-

-

1,024,254

130,813

1,155,067

Other 
comprehensive income, net of tax

-

-

-

(530,679)

(211,103)

(741,782)

(4,801)

(746,583)

Transactions with owners, 
recognised 
directly in

equity









Dividends paid 
(refer to note 10)

-

-

(249,000)

-

-

(249,000)

-

(249,000)

Changes in ownership 
interests

in subsidiaries without change of control









Acquisition of 
non-controlling interests

without change in control

-

-

 

(2,455)

-

-

 

(2,455)

 

722

 

(1,733)

Transactions with non-controlling interests,

recognised 
directly in equity









Contributions by
non-controlling
interests

-

-

-

-

-

-

2,000

2,000

Dividends paid

-

-

-

-

-

-

(25,222)

(25,222)

Acquisition of subsidiary with 
non-controlling interests

-

-

-

-

-

-

250,558

250,558

Balance as at 31 December 2016

4,132,655

2,000,000

5,495,181

(2,124,021)

(705,964)

8,797,851

721,834

9,519,685

The accompanying notes 1 to 34 form an integral part of these consolidated financial statements.


 

DP World Limited and its subsidiaries

 

Consolidated statement of cash flows



2016

2015


Note

USD'000

USD'000

Cash flows provided by operating activities




Gross cash flows from operations

18

2,115,609

1,875,187

Changes in:




Inventories


(11,192)

(2,985)

Accounts receivable and prepayments


(62,671)

44,739

Accounts payable and accruals


52,784

119,121

Provisions, pensions and post-employment benefits


(92,907)

(107,843)





Cash provided by operating activities


2,001,623

1,928,219

Income taxes paid


(157,086)

(147,472)





Net cash provided by operating activities


1,844,537

1,780,747





Cash flows provided by investing activities




Additions to property, plant and equipment

12

(1,073,725)

(1,167,395)

Additions to investment properties

13

(136,901)

(108,307)

Additions to port concession rights

14

(87,502)

(113,419)

Additions to/ advance towards other investments


(23,305)

-

Proceeds from disposal of property, plant and equipment

and port concession rights


 

7,414

 

73,505

Proceeds from disposal of other investments


21,554

-

Proceeds from disposal of a subsidiary


6,965

-

Cash outflow on acquisition of subsidiaries (net of cash acquired)


(142,950)

(2,586,846)

Net cash outflow on acquisition of non-controlling interests

without change in control

 

 

 

(1,733)

 

(125,579)

Interest received


32,140

34,399

Dividends received from equity-accounted investees


151,146

74,748

Additional investment in equity-accounted investees


(13,071)

(57,385)

Net loan from/ (advanced to) equity-accounted investees


1,091

(48,293)





Net cash used in investing activities                                                                


(1,258,877)

(4,024,572)





Cash flows provided by financing activities




Repayment of interest bearing loans and borrowings


(1,287,412)

(714,417)

Drawdown of interest bearing loans and borrowings


1,262,089

1,282,644

Proceeds from issue of 2023 Sukuk


1,200,000

-

Redemption of 2017 Sukuk


(1,174,455)

-

Transaction cost paid on issuance of 2023 Sukuk


(10,505)

-

Interest paid


(418,769)

(373,117)

Dividend paid to the owners of the Company


(249,000)

(195,050)

Contribution by non-controlling interests


2,000

-

Dividend paid to non-controlling interests


(25,222)

(11,845)





Net cash used in financing activities


(701,274)

(11,785)





Net decrease in cash and cash equivalents


(115,614)

(2,255,610)





Cash and cash equivalents as at 1 January


1,436,595

3,723,073

Effect of exchange rate fluctuations on cash held


(21,590)

(30,868)





Cash and cash equivalents as at 31 December

18

1,299,391

1,436,595

 

The accompanying notes 1 to 34 form an integral part of these consolidated financial statements.


Notes to the consolidated financial statements

 

 

1.     Corporate information

 

DP World Limited ("the Company") was incorporated on 9 August 2006 as a Company Limited by Shares with the Registrar of Companies of the Dubai International Financial Centre ("DIFC") under the Companies Law, DIFC Law No. 3 of 2006. The consolidated financial statements for the year ended 31 December 2016 comprise the Company and its subsidiaries (collectively referred to as "the Group") and the Group's interests in equity-accounted investees. The Group is engaged in the business of development and management of international marine and inland terminal operations, maritime services, industrial parks and economic zones, logistics and ancillary services to technology-driven trade solutions.

 

Port & Free Zone World FZE ("the Parent Company"), which originally held 100% of the Company's issued and outstanding share capital, made an initial public offer of 19.55% of its share capital to the public and the Company was listed on the Nasdaq Dubai with effect from 26 November 2007. The Company was further admitted to trade on the London Stock Exchange with effect from 1 June 2011 and voluntarily delisted from the London Stock Exchange on 21 January 2015.

 

Port & Free Zone World FZE is a wholly owned subsidiary of Dubai World Corporation ("the Ultimate Parent Company").

 

The Company's registered office address is P.O. Box 17000, Dubai, United Arab Emirates.

 

2.    Basis of preparation of the consolidated financial statements

 

The consolidated financial statements have been prepared on going concern basis in accordance with International Financial Reporting Standards ("IFRS") and the applicable provisions of the Companies Law pursuant to DIFC Law No. 2 of 2009.

 

The consolidated financial statements have been prepared on the historical cost basis, except for derivative financial instruments, investment at fair value through profit or loss and available-for-sale financial assets which are measured at fair value.

 

a)          Use of estimates and judgements

The management makes estimates and judgements affecting the application of accounting policies and reported numbers in the consolidated financial statements. The significant estimates and judgements are listed below:

 

i.         Estimate of useful lives of property, plant and equipment and port concession rights with finite lives.

ii.      Estimate of expected future cash flows and discount rate for calculating present value of such cash flows used to compute value-in-use of cash-generating units.

iii.    Judgement on recognition of an identifiable intangible asset separate from goodwill in case of business combination at its estimated fair value. This is based on information available and management's expectations on the date of acquisition.

iv.      Estimate of collectible amount of accounts receivables where the collection of full amount is not probable.

v.        Estimate of fair value of derivatives for which an active market is not available is computed using various generally accepted valuation techniques. Such techniques require inputs from observable markets and judgements on market risk and credit risk.

vi.      Judgements by actuaries in respect of discount rates, future salary increments, mortality rates and inflation rate used for computation of defined benefit liability.

vii.   Estimate of level of probability of a contingent liability becoming an actual liability and resulting cash outflow based on the information available on the reporting date.

viii. Consolidation of entities in which the Group holds less than 50% shareholding and non-consolidation of entities in which the Group holds more than 50% shareholding (refer to note 24).

ix.      Significant judgement is required in determining the worldwide provision for income taxes.

x.        Significant judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

 

The actual results may differ from the estimates and judgements made by the management in the above matters. Revisions to the accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

 

b)           New standards and interpretations not yet effective

 

A number of new standards, amendments to standards and interpretations are not effective for annual periods beginning 1 January 2016, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set out below.  The Group does not plan to adopt these standards early.



 

2.             Basis for preparation of the consolidated financial statements (continued)

 

b)             New standards and interpretations not yet effective (continued)

 

i.            IFRS 9 Financial Instruments (effective from 1 January 2018)

IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities and introduces a new expected credit loss model. The new guidance has also substantially reformed the existing hedge accounting rules. It provides a more principles-based approach that aligns hedge accounting closely with risk management policies. The actual impact of adopting IFRS 9 on the Group's consolidated financial statements in 2018 is not known and cannot be reliably estimated because it will be dependent on financial instruments that the Group holds and economic conditions at that time as well as the elections and judgements it will make in the future.

 

ii.        IFRS 15 Revenue from contracts with customers (effective from 1 January 2018)

IFRS 15 replaces IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer - so the notion of control replaces the existing notion of risks and rewards. The standard provides a single principles-based five-step model to be applied to all contracts with customers. The adoption of this standard is not expected to have any significant impact on the Group's financial statements.

 

iii.     IFRS 16 Leases (effective from 1 January 2019)

IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a lease, SIC-15 Operating lease incentives and SIC -27 Evaluating the substance of transaction involving the legal form of lease.

The new standard requires the lessee to recognise the operating lease commitment on the balance sheet. The Group, as a lessee, has substantial operating leases and commitments as disclosed in note 31. The standard would require future lease commitments to be recognised as a liability, with a corresponding right of use asset. This will impact the EBITDA and debt to equity ratios of the Group. In addition, depending on the stage of lease, there would be a different pattern of expense recognition on leases. Currently, lease expenses are recognised in cost of sales, however, in future the lease expense would be an amortisation charge and finance expense.

The Group is in the process of collating its leases and computing the impact. The impact of this standard's application is expected to be significant.

iv.       Amendment to IAS 7, Statement of cash flows (effective from 1 January 2017)

The amendments require entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. The adoption of this standard is not expected to have any significant impact on the Group's financial statements.

 

v.          Amendments to IAS 12, Income taxes (effective from 1 January 2017)

The amendments clarify the accounting for deferred tax assets for unrealized losses on debt instruments measured at fair value. The adoption of this standard is not expected to have any significant impact on the Group's financial statements.

 

3.             Significant accounting policies

The following significant accounting policies have been consistently applied in the preparation of these consolidated financial statement throughout the Group to all the years presented, unless otherwise stated.

 

a)             Basis of consolidation

 

i.             Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

 

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

 

ii.            Change in ownership interests in subsidiaries without loss of control

Changes in the Group's interests in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The difference between the fair value of any consideration paid and relevant share acquired in the carrying value of net assets of the subsidiary is recorded in equity under retained earnings.

 

iii.           Disposal of subsidiaries (loss of control)

On the loss of control, the Group derecognises the subsidiary and recognises any surplus or deficit arising on the loss of control in the consolidated statement of profit or loss. Any retained interest is re-measured at fair value on the date control is lost and accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

 

3.             Significant accounting policies (continued)

 

a)             Basis of consolidation (continued)

 

iv.            Non-controlling interests

For each business combination, the Group elects to measure any non-controlling interests at their proportionate share of the acquiree's identifiable net assets at the date of acquisition.

 

v.             Structured entities

The Group has established DP World Sukuk Limited and DP World Crescent Limited (a limited liability company incorporated in the Cayman Islands) as a structured entity ("SE") for the issue of Sukuk Certificates. These certificates are listed on Nasdaq Dubai and London Stock Exchange. The Group does not have any direct or indirect shareholding in this entity.

 

The Group has also incorporated JAFZ Sukuk (2019) Limited as a SE for issuing New JAFZ Sukuk which are currently listed on Nasdaq Dubai and the Irish Stock Exchange.

 

The Group consolidates the above SE's based on an evaluation of the substance of its relationship with the Group. This relationship results in the majority of the benefits related to the SE's operations and net assets being received by the Group. It also exposes the Group to risks incident to the SE's activities and retains the majority of the residual or ownership risks related to the SE or its assets.

 

vi.            Investments in associates and joint ventures (equity-accounted investees)

The Group's interest in equity-accounted investees comprise interest in associates and joint ventures. An associate is an entity over which the Group has significant influence. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture.

 

Investments in equity-accounted investees are accounted for using the equity method and are initially recorded at cost including transaction costs. The Group's investment includes fair value adjustments (including goodwill) net of any accumulated impairment losses.

 

vii.           Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from the transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

 

b)             Foreign currency

i.           Functional and presentation currency

These consolidated financial statements are presented in USD, which is the Group's presentation currency. Items included in the financial statements of each of the Group's entities are measured using the currency of the primary environment in which it operates (functional currency).

 

ii.        Foreign currency transactions and balances

Transactions in foreign currencies are translated to the functional currency of each entity at the foreign exchange rate ruling on the date of the transaction. Foreign exchange gains and losses arising on transactions are recognised in the income statement. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency of each entity at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities denominated in foreign currency are translated to the functional currency of each entity at the foreign exchange rate ruling at the date of transaction with no further remeasurement in future.

 

iii.      Foreign operations

For the preparation of consolidated financial statements, the differences arising on translation of financial statements of foreign operations into USD are recognised in other comprehensive income and accumulated in the translation reserve except to the extent of share of non-controlling interests in such differences. Accumulated translation differences are re-cycled to profit or loss on de-recognition of foreign operations as part of the gain or loss on such derecognition. In case of partial derecognition, accumulated differences proportionate to the stake derecognised are re-cycled.

 

If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, then foreign currency differences arising from such item form part of the net investment in the foreign operation. Accordingly, such differences are recognised in OCI and accumulated in the translation reserve.

Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised in the consolidated statement of other comprehensive income, to the extent that the hedge is effective.

 

3.             Significant accounting policies (continued)

 

c)             Financial instruments

 

i.            Non-derivative financial assets

 

Initial recognition and subsequent measurement

The Group classifies non-derivative financial assets into the following categories: held to maturity financial assets, loans and receivables and available-for-sale financial assets. The Group determines the classification of its financial assets at initial recognition. All non-derivative financial assets are recognised initially at fair value, plus, any directly attributable transaction costs. The Group's non-derivative financial assets comprise investments in an unquoted infrastructure fund, debt securities held to maturity, trade and other receivables, due from related parties and, cash and cash equivalents.

 

The subsequent measurement of non-derivative financial assets depends on their classification.

 

Derecognition

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.

 

ii.         Non-derivative financial liabilities

 

Initial recognition and measurement

The Group's non-derivative financial liabilities consist of loans and borrowings, bank overdrafts, amounts due to related parties, and, trade and other payables. All non-derivative financial liabilities are recognised initially at fair value less any directly attributable transaction costs. The Group classifies all its non-derivative financial liabilities as financial liabilities to be carried at amortised cost using effective interest method.

 

Fees paid on the establishment of loan facilities are recognised as transaction costs to the extent there is evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

 

Subsequent measurement

The subsequent measurement of non-derivative financial liabilities are carried at their amortised cost using the effective interest method.

 

Convertible bond

Convertible bonds issued by the Group are denominated in USD and can be converted into ordinary shares. Convertible bonds are split into two components: a debt component and a component representing the embedded derivative in the convertible bond. The debt component represents a non-derivative financial liability for future coupon payments and the redemption of the principal amount. The embedded derivative, a financial derivative liability, represents the value of the option that bond holders can convert into ordinary shares. The Group has not recorded the embedded derivative within equity due to the existence of cash settlement terms with the Company.

 

Derecognition

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expired.

 

iii.      Derivative financial instruments

The Group holds derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its cash flows exposed to risk of fluctuations in foreign currencies and interest rates.

 

Initial recognition

On initial designation of the derivatives as the hedging instrument, the Group formally documents the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and hedged risk together with the methods that will be used to assess the effectiveness of the hedging relationship

 

Derivatives are recognised initially at fair value and attributable transaction costs are recognised in the consolidated statement of profit or loss when incurred. Derivative instruments that are not designated as hedging instruments in hedge relationships are classified as financial liabilities or assets at fair value through profit or loss.

 

 

 

 

3.             Significant accounting policies (continued)

 

c)             Financial instruments (continued)

 

iii.      Derivative financial instruments (continued)

 

Subsequent measurement

Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly in consolidated statement of other comprehensive income to the extent that the hedge is effective and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the consolidated statement of profit or loss.

 

When the hedged item is a non-financial asset, the amount recognised in the consolidated statement of other comprehensive income is transferred to the carrying amount of the asset when it is recognised. In other cases, the amount recognised in consolidated statement of other comprehensive income is transferred to the consolidated statement of profit or loss in the same period that the hedged item affects the consolidated statement of profit or loss.

 

Derecognition

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in consolidated statement of other comprehensive income remains there until the forecast transaction or firm commitment occurs. If the forecast transaction or firm commitment is no longer expected to occur, then the balance in equity is reclassified to profit or loss.

 

d)             Property, plant and equipment

 

i.          Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses (refer to note 3(j) (i)).

 

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of a self-constructed asset includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use and the cost of dismantling and removing the items and restoring the site on which they are located. Such property, plant and equipment does not directly increase the future economic benefits of any particular existing item of property, plant and equipment, but may be necessary for an entity to obtain the future economic benefits from its other assets.

 

Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.

 

Capital work-in-progress is measured at cost less impairment losses and not depreciated until such time the assets are ready for intended use and transferred to the respective category under property, plant and equipment.

 

Dredging

Dredging expenditure is categorised into capital dredging and major maintenance dredging. Capital dredging is expenditure which includes creation of a new harbour, deepening or extension of the channel berths or waterways in order to allow access to larger ships which will result in future economic benefits for the Group. This expenditure is capitalised and amortised over the expected period of the relevant concession agreement. Major maintenance dredging is expenditure incurred to restore the channel to its previous condition and depth. Maintenance dredging is regarded as a separate component of the asset and is capitalised and amortised evenly over 10 years.

 

ii.         Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably.

 


3.             Significant accounting policies (continued)

 

d)             Property, plant and equipment (continued)

 

iii.       Depreciation

Land and capital work in progress is not depreciated. Depreciation on other assets is recognised in the consolidated statement of profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment and is based on cost less residual value. Leased assets are depreciated on straight-line basis over their estimated useful lives or lease term whichever is shorter.

 

The estimated useful lives of assets are as follows:

 

Assets

Useful life (years)

Buildings

5 - 50

Plant and equipment

3 - 25

Vessels

10 - 30

Dredging (included in Land and buildings)

10 - 99

 

Dredging costs are depreciated on a straight line basis based on the lives of various components of dredging.

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted prospectively, if appropriate.

 

iv.       Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time, the assets are substantially ready for their intended use or sale.

 

e)             Investment properties

Investment property is measured initially at cost, including related transaction costs and where applicable borrowing costs. After initial recognition, investment property is carried at cost less accumulated depreciation and impairment, if any. Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably.

 

Investment property under construction is not depreciated until such time as the relevant assets are completed and commissioned.

 

Land is not depreciated. Depreciation is calculated using the straight-line method to allocate the cost to the residual values over the estimated useful lives, as follows:

 

Assets

Useful life (years)

Buildings

20 - 35

Infrastructure

5 - 50

 

The useful lives and depreciation method are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from these assets.

 

f)             Land use rights

Land use rights represents the prepaid lease payments of leasehold interests in land under operating lease arrangements. These rights are amortised using the straight-line method to allocate the cost over the term of rights of 99 years.

 

g)            Goodwill

Goodwill arises on the acquisition of subsidiaries and equity-accounted investees. Goodwill represents the excess of the cost of the acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.

 

Goodwill is measured at cost less accumulated impairment losses (refer to note 3(j) (i)). Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired. An impairment loss in respect of goodwill is not reversed.

 

In respect of equity-accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment and is not tested for impairment separately.

3.             Significant accounting policies (continued)

 

h)            Port concession rights

The Group classifies the port concession rights as intangible assets as the Group bears demand risk over the infrastructure assets. Substantially all of the Group's terminal operations are conducted pursuant to long-term operating concessions or leases entered into with the owner of a relevant port for terms generally between 25 and 50 years (excluding the port concession rights relating to equity-accounted investees). The Group commonly starts negotiations regarding renewal of concession agreements with approximately 5-10 years remaining on the term and often obtains renewals or extensions on the concession agreements in advance of their expiration in return for a commitment to make certain capital expenditures in respect of the subject terminal. In addition, such negotiations may result in the re-basing of rental charges to reflect prevailing market rates. However, based on the Group's experience, incumbent operators are typically granted renewal often because it can be costly for a port owner to switch operators, both administratively and due to interruptions to port operations and reduced productivity associated with such transactions. Port concession rights consist of:

 

i.           Port concession rights arising on business combinations

The cost of port concession rights acquired in a business combination is the fair value as at the date of acquisition.

 

Following initial recognition, port concession rights are carried at cost less accumulated amortisation and any accumulated impairment losses (refer to note 3(j)(i)). Internally generated port concession rights, excluding capitalised development costs, are recognised in the consolidated statement of profit or loss as incurred. The useful lives of port concession rights are assessed to be either finite or indefinite. Port concession rights with finite lives are amortised on a straight line basis over the useful economic life and assessed for impairment whenever there is an indication that the port concession rights may be impaired.

 

The amortisation period and amortisation method for port concession rights with finite useful lives are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expenses on port concession rights with finite useful lives are recognised in the consolidated statement of profit or loss on a straight line basis. Port concession rights with indefinite lives (arising where freehold rights are granted) are not amortised and are tested for impairment at least on an annual basis or when the impairment indicator exists, either individually or at the cash-generating unit level. The useful life of port concession rights with an indefinite life is reviewed annually to determine whether the indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

 

ii.        Port concession rights arising from Service Concession Arrangements (IFRIC 12)

The Group recognises port concession rights arising from a service concession arrangement, in which the grantor (government or port authorities) controls or regulates the services provided and the prices charged, and also controls any significant residual interest in the infrastructure such as property, plant and equipment, if the infrastructure is existing infrastructure of the grantor or the infrastructure is constructed or purchased by the Group as part of the service concession arrangement.

 

Port concession rights also include certain property, plant and equipment which are reclassified as intangible assets in accordance with IFRIC 12 'Service Concession Arrangements'. These assets are amortised based on the lower of their useful lives or concession period.

 

Gains or losses arising from de-recognition of port concession rights are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated statement of profit or loss when the asset is derecognised.

 

The estimated useful lives for port concession rights range within a period of 5 - 50 years (including the concession rights relating to equity-accounted investees).



 

3.             Significant accounting policies (continued)

 

i)             Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

               

i.          Group as a lessee

Assets held by the Group under leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are recognised in the consolidated statement of profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

 

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance lease.

 

Contingent payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

 

ii.        Group as a lessor

Leases where the Group retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as income in the period in which they are earned.

 

iii.       Leasing and sub-leasing transactions

Leasing and sub-leasing transactions are designed to achieve certain benefits for the third parties in overseas locations in return for a cash benefit to the Group. Such cash benefit is accounted in the consolidated statement of profit or loss based on its economic substance.

 

iv.        Leases of land in port concession

Leases of land have not been classified as finance leases as the Group believes that the substantial risks and rewards of ownership of the land have not been transferred. Accordingly, these are accounted as operating leases. The existence of a significant exposure of the lessor to performance of the asset through contingent rentals is the basis of concluding that substantially all the risks and rewards of ownership have not passed.

 

j)             Impairment

 

i.           Non-financial assets

The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets are reviewed for impairment whenever there is an indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.

 

For impairment testing, the assets are grouped together into smallest group of assets (cash generating unit or "CGU")   that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU's.

 

Goodwill and port concession rights with infinite useful lives, as part of their respective cash-generating units, are also reviewed for impairment at each reporting date or at least once in a year regardless of any indicators of impairment. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash generating unit.

 

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro-rata basis.

 

In respect of non-financial assets (other than goodwill), impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount, which would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

 



 

3.             Significant accounting policies (continued)

 

j)             Impairment (continued)

 

ii.         Financial assets

Financial assets not classified at fair value through profit or loss are assessed at each reporting date to determine whether there is objective evidence of impairment.

 

Loans and receivables and held to maturity investments

The Group considers evidence of impairment for loans and receivables and held to maturity investment securities at both a specific asset level and collective level. All individually significant receivables and held to maturity investment securities are assessed for specific impairment.

 

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

 

Available-for-sale financial assets

A significant or prolonged decline in the fair value of an equity investment is considered as objective evidence of impairment. The Group considers that generally a decline of 20% will be considered as significant and a decline of over 9 months will be considered as prolonged.

 

k)            Employee benefits

 

i.            Pension and post-employment benefits

 

Defined contribution plans

A defined contribution plan is a post-employment benefit plan in which the Company pays the fixed contribution to a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an expense in the consolidated statement of profit or loss during which the services are rendered by employees.

 

Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.     

 

The Group's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine the present value, and the fair value of any plan asset is deducted to arrive at net obligation. The calculation is performed annually by a qualified actuary using the projected unit credit method which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of defined benefit obligation) and is based on actuarial advice.

 

Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest) are recognised directly in the consolidated statement of other comprehensive income. The cost of providing benefits under the defined benefit plans is determined separately for each plan.

 

Contributions, including lump sum payments, in respect of defined contribution pension schemes and multi-employer defined benefit schemes where it is not possible to identify the Group's share of the scheme, are charged to the consolidated statement of profit or loss as they fall due.

 

ii.        Short-term service benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

3.             Significant accounting policies (continued)

 

l)             Provisions

Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.

 

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost in the consolidated statement of profit or loss.

 

m)           Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.

 

Revenue mainly consists of containerized stevedoring, other containerized revenue, non-containerized revenue, service concession revenue and lease rentals. Non-containerized revenue mainly includes logistics and handling of break bulk cargo.

 

The following specific recognition criteria must also be met before revenue is recognised:

 

i.           Rendering of services

Revenue from providing containerized stevedoring, other containerized services and non-containerized services is recognised on the delivery and completion of those services.

 

ii.        Service concession arrangements (IFRIC 12)

Revenues relating to construction contracts which are entered into with government authorities for the construction of the infrastructure necessary for the provision of services are measured at the fair value of the consideration received or receivable. Revenue from service concession arrangements is recognised based on the fair value of construction work performed at the reporting date.

 

iii.     Lease rentals and related services

A lease rental is recognised on a straight line basis over the lease term. Where the consideration for the lease is received for subsequent period, the attributable amount of revenue is deferred and recognised in the subsequent period. Unrecognised revenue is classified as deferred revenue under liabilities in the consolidated statement of financial position. Revenue from administrative service, license, registration and consultancy is recognised as the service is provided.

 

n)            Finance income and costs

Finance income comprises interest income on funds invested and gains on hedging instruments that are recognised in the consolidated statement of profit or loss. Interest income is recognised as it accrues, using the effective interest method.

 

Finance costs comprises interest expense on borrowings, unwinding of the discount on provisions, impairment losses recognised on financial assets and losses on hedging instruments that are recognised in the consolidated statement of profit or loss.

 

Finance income and costs also include realised and unrealised exchange gains and losses on monetary assets and liabilities (refer to note 3(b) (ii)).



 

3.             Significant accounting policies (continued)

 

o)             Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the consolidated statement of profit or loss except to the extent that it relates to a business combination, or items recognised directly in consolidated statement of other comprehensive income.

 

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. It also includes any adjustment to tax payable in respect of previous years.

 

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

 

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized.

 

Current tax and deferred tax assets and liabilities are offset only if certain criteria are met.

 

p)             Earnings per share

The Group presents basic and diluted earnings per share ("EPS") for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.

 

Diluted EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company (after adjusting for interest on the convertible bond and other consequential changes in income or expense that would result from the assumed conversion) by the weighted average number of ordinary shares outstanding during the year including the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares (also refer to note 11).

 

q)             Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. All operating segments' operating results are reviewed regularly by the Company's Board of Directors ('Chief Operating Decision Maker') to assess performance.

 

r)             Separately disclosed items

The Group presents, as separately disclosed items on the face of the consolidated statement of profit or loss, those items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow users to understand better, the elements of financial performance in the period, so as to facilitate a comparison with prior periods and a better assessment of trends in financial performance.

 

4.             Segment information

 

The Group has identified the following geographic areas as its basis of segmentation.

 

·              Asia Pacific and Indian subcontinent

·              Australia and Americas

·              Middle East, Europe and Africa

 

Each of these operating segments have an individual appointed as Segment Director responsible for these segments, who in turn reports to the Chief Operating Decision Maker. In addition to the above reportable segments, the Group reports unallocated head office costs, finance costs, finance income and tax expense under the head office segment

 

The Group measures segment performance based on the earnings before separately disclosed items, interest, tax, depreciation and amortisation ("Adjusted EBITDA").

 

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and port concession rights other than goodwill.

 

Information regarding the results of each reportable segment is included below.


DP World Limited and its subsidiaries

 

Notes to consolidated financial statements

 

4.             Segment information (continued)

The following table presents certain results, assets and liabilities information regarding the Group's segments as at the reporting date.

                                                                                                                                                                                                                                                                                                                                          


Asia pacific and Indian subcontinent

Australia and Americas

Middle East, Europe and Africa

Head office

Inter-segment

Total


2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000














Revenue

501,496

   489,374

659,020

   642,137

3,071,052

2,911,399

-

   -

-

   -

4,231,568

4,042,910

Adjusted for separately

disclosed items

 

(68,243)

 

(75,171)

 

-

 

-

    

-

 

-

 

-

 

-

 

-

 

-

 

(68,243)

 

(75,171)

Revenue before separately disclosed items

 

433,253

 

414,203

 

659,020

642,137

 

3,071,052

2,911,399

 

-

 

   -

-

-

 

4,163,325

3,967,739














Adjusted EBITDA

316,476

   280,963

293,052

   189,619

1,791,269

  1,611,506

(137,720)

  (153,972)

-

   -

2,263,077

1,928,116

Finance income

-

   -

-

   -

-

   -

100,247

   104,969

-

   -

100,247

   104,969

Finance costs

-

   -

-

   -

-

   -

(438,357)

  (492,087)

-

   -

(438,357)

  (492,087)

Tax expense

-

   -

-

   -

-

   -

(122,579)

  (90,988)

-

   -

(122,579)

  (90,988)

Depreciation and amortisation

(67,260)

  (68,423)

(77,389)

  (68,683)

(391,184)

  (335,228)

(7,050)

  (7,791)

-

   -

(542,883)

  (480,125)

Adjusted net profit/ (loss) for the year before separately disclosed items

 

 

249,216

 

 

   212,540

 

 

215,663

 

120,936

 

 

1,400,085

 

1,276,278

 

 

(605,459)

 

 

  (639,869)

 

 

-

 

 

   -

 

 

1,259,505

 

969,885

Adjusted for separately

disclosed items

 

(6,284)

 

   -

 

2,076

 

   -

 

(8,171)

  15,604

 

(92,059)

 (13,647)

 

-

 

   -

 

(104,438)

 

   1,957

Profit/ (loss) for the year

242,932

   212,540

217,739

   120,936

1,391,914

1,291,882

(697,518)

  (653,516)

-

   -

1,155,067

   971,842

 

Net finance cost and tax expense from various geographical locations and head office have been grouped under head office.



 

DP World Limited and its subsidiaries

 

Notes to consolidated financial statements

 

4.             Segment information (continued)

                                                                                                                                                                                                                                                                                                                                                        


Asia pacific and Indian subcontinent

Australia and Americas

Middle East, Europe and Africa

Head office

Inter-segment

Total


2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000














Segment assets

4,350,319

  3,798,105

2,092,970

  1,992,483

15,333,720

14,922,804

9,205,350

9,823,975

(10,278,030)

(10,278,240)

20,704,329

20,259,127

Segment liabilities

605,616

   344,585

379,373

   569,667

3,455,870

  3,433,642

8,524,199

  8,935,589

(2,855,393)

(3,246,910)

10,109,665

10,036,573

Tax liabilities *

-

   -

-  

   -

-  

   -

1,074,979

1,087,956

-

   -

1,074,979

  1,087,956

Total liabilities

605,616

344,585

379,373

569,667

3,455,870

3,433,642

9,599,178

10,023,545

(2,855,393)

(3,246,910)

11,184,644

11,124,529














Capital expenditure

81,068

   81,705

156,457

   74,052

1,057,844

   1,230,470

2,759

   2,894

-

   -

1,298,128

   1,389,121

Depreciation

22,801

   24,941

55,527

   53,422

310,077

   269,776

7,050

   7,791

-

   -

395,455

   355,930

Amortisation/ impairment

 

44,459

 

   43,482

 

21,862

 

 15,261

 

81,883

 

   66,105

 

-

 

   -

 

-

 

   -

 

148,204

124,848














Tax expense

-

   -

-

   -

-

   -

122,579

   90,988

-

   -

122,579

   90,988

 

*Tax liabilities and tax expenses from various geographical locations have been grouped under head office.


5.             Revenue


2016

2015


USD'000

USD'000

Revenue consists of:



Containerized stevedoring revenue

             1,535,059

1,506,735

Containerized other revenue

             1,315,186

1,239,744

Non-containerized revenue

                 759,516

802,314

Service concession revenue (refer to note 9)

                   68,243

75,171

Lease rentals and related services

                 553,564

418,946

Total

             4,231,568

4,042,910

 

6.     Profit for the year


2016

2015


USD'000

USD'000

Profit for the year is stated after charging the following costs:



Staff costs

826,947

818,203

Depreciation and amortization

542,883

480,125

Operating lease rentals

364,365

375,743

Impairment loss (refer to note 9)

776

653

 

7.     Finance income and costs


2016

2015


USD'000

USD'000

Finance income



Interest income

56,420

53,469

Exchange gains

43,827

51,500




Finance income before separately disclosed items

100,247

104,969

Separately disclosed items (refer to note 9)

47,462

9,705




Finance income after separately disclosed items

147,709

114,674




Finance costs



Interest expense

(375,065)

(381,951)

Exchange losses

(57,672)

(103,356)

Other net financing expense in respect of pension plans

(5,620)

(6,780)




Finance costs before separately disclosed items

(438,357)

(492,087)

Separately disclosed items (refer to note 9)

(139,521)

(23,352)




Finance costs after separately disclosed items

(577,878)

(515,439)




Net finance costs after separately disclosed items

(430,169)

(400,765)



 

8.     Income tax

The major components of income tax expense for the year ended 31 December:


2016

2015


USD'000

USD'000




Current tax on profits for the year

175,195

146,162

Adjustments for current tax of prior periods

(39,193)

(15,445)





136,002

130,717

Deferred tax credit

(13,423)

(39,729)

Income tax expense

122,579

90,988

Share of income tax of equity-accounted investees

47,130

54,014




Total tax expense

169,709

145,002




Income tax balances included in the consolidated statement of financial position:



Current income tax receivable (included within accounts receivable and prepayments)

 

32,318

 

24,731

Current income tax liabilities

129,722

147,320

 

The relationship between the total tax expense and the accounting profit can be explained as follows:





Net profit before tax


1,277,646

1,062,830





Tax at the Company's domestic rate of 0% (2015: 0%)


-

-

Income tax on foreign earnings


121,342

124,289

Net current year tax losses (utilised)/ incurred, on which deferred tax is not recognised


 

27,189

 

7,874

Tax charge on equity-accounted investees


47,130

54,014

Effect of rate change


(11,035)

(34,341)

Deferred tax in respect of fair value adjustments


(11,436)

(6,696)

Others


37,226

15,675





Tax expense before prior year adjustments


210,416

160,815





Tax over provided in prior periods:




- current tax


(39,193)

(15,445)

- deferred tax


(1,514)

(368)





Total tax expense from operations before separately disclosed items

 

(A)

 

169,709

 

145,002

Separately disclosed items


-

-





Total tax expense


169,709

145,002





Net profit before tax


1,277,646

1,062,830

Separately disclosed items


104,438

(1,957)

Share of income tax of equity-accounted investees


47,130

54,014





Adjusted profit before tax and before separately disclosed items

 

(B)

 

1,429,214

 

1,114,887





Effective tax rate before separately disclosed items

(A/B)

11.87%

13.01%

 



 

8.             Income tax (continued)

 

Unrecognised deferred tax assets

Deferred tax assets are not recognised on trading losses of USD 656,449 thousand (2015: USD 649,508 thousand) where utilisation is uncertain, either because they have not been agreed with tax authorities, or because the likelihood of future taxable profits is not sufficiently certain, or because of the impact of tax holidays. Under current legislation, USD 420,692 thousand (2015: USD 446,958 thousand) of these trading losses can be carried forward indefinitely.

 

Deferred tax assets are also not recognised on capital and other losses of USD 221,394 thousand (2015: USD 271,638 thousand) as their utilisation is uncertain.

 

Group tax rates

The Group is not subject to income tax on its UAE operations. The total tax expense relates to the tax payable on the profit earned by the overseas subsidiaries and equity-accounted investees as adjusted in accordance with the taxation laws and regulations of the countries in which they operate. The applicable tax rates in the regions in which the Group operates are set out below:

 

Geographical segments

Applicable corporate tax rate



Asia Pacific and Indian subcontinent

16.5% to 34.6%

Australia and Americas

0% to 36.0%

Middle East, Europe and Africa

0% to 34.0%

 

Movement in temporary differences during the year:


1 January

2016

 

Recognised in consolidated statement of profit or loss

                Acquisitions in the period

Translation and other movements

31 December

2016


USD'000

USD'000

USD'000

USD'000

USD'000

Deferred tax liabilities






Property, plant and equipment

106,667

256

10,580

(24,904)

92,599

Investment in equity-accounted investees

40,158

6,218

-

1,082

47,458

Fair value of acquired intangibles

425,169

(21,390)

54,850

(17,214)

441,415

Others

425,366

(1,513)

(139)

(12,946)

410,768

Total before set off

997,360

 (16,429)

65,291

  (53,982)

992,240







Set off of tax

(56,724)

-

-

-

 (46,983)

Net deferred tax liabilities

940,636

-

-

-

945,257







Deferred tax assets






Pension and post-employment benefits

7,185

594

677

4,619

13,075

Financial instruments

13,644

(1,791)

-

(3,487)

8,366

Provisions

2,839

398

881

(206)

3,912

Tax value of losses carried forward

recognised

33,148

(2,671)

-

(8,847)

21,630

Total before set off

56,816

(3,470)

1,558

 (7,921)

46,983

                                                                                                   






Set off of tax

(56,724)

-

-

-

(46,983)

Net deferred tax assets (included

within non-current account

receivables and prepayments)

92

-

-

-

-

 


9.     Separately disclosed items


2016

2015


USD'000

USD'000

Revenue



Construction contract revenue relating to service concessions

68,243

75,171

Cost of sales



Construction contract costs relating to service concessions

(68,243)

(75,171)

General and administrative expenses



Impairment of property, plant and equipment

(776)

(653)

Other income

3,878

16,867

Loss on disposal and change in ownership of business

(12,524)

(610)

Share of loss from equity-accounted investees

(2,957)

-

Finance income



Change in fair value of convertible bond option

47,462

-

Net gain on restructuring of loan

-

9,705

Finance costs



Finance costs related to convertible bond

(20,110)

(16,175)

Sukuk redemption costs

(61,755)

-

Transaction costs

(54,224)

(7,177)

Hedge costs

(3,432)

-




Total

(104,438)

1,957

 

Construction contract revenue and costs: In accordance with IFRIC 12 'Service Concession Arrangements', the Group has recorded revenue on the construction of a port in the 'Asia Pacific and Indian subcontinent' region. The construction revenue represents the fair value of the construction services provided in developing the port. No margin has been recognised, as in management's opinion the fair value of the construction services provided approximates the construction cost.

 

Impairment of property, plant and equipment relates to a subsidiary in the 'Middle East, Europe and Africa' region.

 

Other income represents the gain on sale of other investments in the 'Asia Pacific and Indian subcontinent' region and in the 'Middle East, Europe and Africa' region. (2015 represents gain on sale of land in a subsidiary in the 'Middle East, Europe and Africa' region).

 

Loss on disposal and change in ownership of business relates to the loss on sale of a subsidiary in the 'Middle East, Europe and Africa' region and loss on re-measurement to fair value of the existing stake resulting from the acquisition of a controlling stake in an equity-accounted investee in the 'Asia Pacific and Indian subcontinent' region. (2015 relates to the loss on sale of a subsidiary in the 'Middle East, Europe and Africa' region).

 

Share of loss from equity-accounted investees represents the non-recurring expenses incurred in the 'Middle East, Europe and Africa' region.

 

Change in fair value of convertible bond option relates to the movement based on re-measured fair value of the embedded derivative liability of the convertible bonds.

 

Net gain on restructuring of loan mainly represents the fair value gain being the difference between the fair value of the loan based on market rate of interest as against the carrying value, reversal of excess interest accrual on the old loan partly offset by the transaction costs written off on the restructuring of a loan in a subsidiary in the 'Asia Pacific and Indian subcontinent' region.

 

Finance costs related to convertible bond represents the accretion of liability component as at the reporting date to the amount that will be payable on redemption of the convertible bond.

 

Sukuk redemption costs represents the redemption premium paid on an early redemption of sukuk bond liability.

 



 

9.     Separately disclosed items (continued)

 

Transaction costs relates to costs on restructuring and termination of loans in subsidiaries in the 'Middle East, Europe and Africa' region.

 

Hedge costs relates to the loss on termination of interest rate swap in a subsidiary in the 'Australia and Americas' region and an ineffective element of a cash flow hedge in a subsidiary in the 'Middle East, Europe and Africa' region.

 

10.  Dividends


2016

2015


USD'000

USD'000

Declared and paid during the year:



Final dividend: 30 US cents per share/ 23.5 US cents per share

249,000

195,050

Proposed for approval at the annual general meeting



(not recognised as a liability as at 31 December):



Final dividend: 38 US cents per share/ 30 US cents per share

315,400

249,000

 

11.  Earnings per share

The calculation of basic and diluted earnings per share is based on the profit attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding.


2016

2016

2015

2015


Before separately disclosed items

Adjusted for separately disclosed items

Before separately disclosed items

Adjusted for separately

disclosed items


USD'000

USD'000

USD'000

USD'000






Profit attributable to the ordinary shareholders of the Company (a)

 

1,126,554

 

1,024,254

 

882,576

 

882,931

Adjustment for costs/ (income) related to convertible bonds saved as a result of the conversion

 

 

18,666

 

 

(8,686)

 

 

18,599

 

 

34,774

Profit attributable to the ordinary shareholders of the Company after conversion (b)

 

 

1,145,220

 

 

1,015,568

 

 

901,175

 

 

917,705

Weighted average number of basic shares outstanding as at 31 December (c)

 

830,000,000

 

830,000,000

 

830,000,000

 

830,000,000

Weighted average numbers of shares due to conversion of convertible bond

 

36,846,510

 

36,846,510

 

36,846,510

 

36,846,510

Total weighted average number of ordinary shares (diluted) outstanding - (d)

 

 

866,846,510

 

 

866,846,510

 

 

866,846,510

 

 

866,846,510

Basic earnings per share US cents
 - (a/c)

 

135.73

 

123.400

 

106.33

 

106.38

Diluted earnings per share US cents - (b/d)

 

132.11

 

117.166

 

103.96

 

105.87



 

12.  Property, plant and equipment


Land and buildings

Plant and equipment

Vessels

Capital work- in-progress

Total


USD'000

USD'000

USD'000

USD'000

USD'000

Cost






As at 1 January 2015

3,424,782

3,739,307

274,767

889,842

8,328,698

Acquired through business combination

 

27,809

                     27,153

 

-

 

12,723

 

67,685

Additions during the year

6,322

36,588

5,358

1,119,127

1,167,395

Transfers from capital

work-in-progress

 

584,673

 

286,747

 

34,222

 

(905,642)

 

-

Transfer (to)/ from investment properties

 

(28,327)

 

-

 

-

 

82

 

(28,245)

Disposals

(51,204)

(44,373)

(20,058)

(36)

(115,671)

Translation adjustment

(79,380)

(118,240)

(14,740)

(59,138)

(271,498)

As at 31 December 2015

3,884,675

3,927,182

279,549

1,056,958

9,148,364







As at 1 January 2016

3,884,675

3,927,182

279,549

1,056,958

9,148,364

Acquired through business combination

 

14,964

 

327,868

 

-

 

1,649

 

344,481

Additions during the year

11,324

62,225

2,960

997,216

1,073,725

Transfers from capital

work-in-progress

 

381,421

 

282,300

 

2,013

 

(665,734)

 

-

Transfer (to)/ from investment properties

 

-

 

270

 

-

 

-

 

270

Disposals

(30,296)

(48,649)

(2,455)

-

(81,400)

Translation adjustment

(90,513)

(285,415)

(3,817)

(64,484)

(444,229)

As at 31 December 2016

4,171,575

4,265,781

278,250

1,325,605

10,041,211







Depreciation and impairment






As at 1 January 2015

782,140

1,130,022

60,376

-

1,972,538

Charge for the year

109,734

203,474

19,050

-

332,258

Impairment loss

-

653

-

-

653

Transfer to investment properties

(4,587)

-

-

-

(4,587)

On disposals

(963)

(42,709)

(15,693)

-

(59,365)

Translation adjustment

(16,803)

(39,663)

(5,793)

-

(62,259)

As at 31 December 2015

869,521

1,251,777

57,940

-

2,179,238







As at 1 January 2016

869,521

1,251,777

57,940

-

2,179,238

Acquired through business combination

 

1,289

 

125,875

 

-

 

-

 

127,164

Charge for the year

130,858

212,027

19,392

-

362,277

Impairment loss

4

772

-

-

776

On disposals

(21,966)

(44,699)

(1,370)

-

(68,035)

Translation adjustment

(10,479)

(70,089)

(1,718)

-

(82,286)

As at 31 December 2016

969,227

1,475,663

74,244

-

2,519,134







Net book value






At 31 December 2015

3,015,154

2,675,405

221,609

1,056,958

6,969,126

At 31 December 2016

3,202,348

2,790,118

204,006

1,325,605

7,522,077

 

In the prior years, the Group had entered into agreements with third parties pursuant to which the Group participated in a series of linked transactions including leasing and sub-leasing of certain cranes of the Group ("the Crane French Lease Arrangements").  At 31 December 2016, cranes with aggregate net book value amounting to USD 225,756 thousand (2015: USD 241,494 thousand) were covered by these Crane French Lease Arrangements. These cranes are accounted for as property, plant and equipment as the Group retains all the risks and rewards incidental to the ownership of the underlying assets.

At 31 December 2016, property, plant and equipment with a carrying amount of USD 2,180,671 thousand (2015: USD 2,315,238 thousand) are pledged to bank loans (refer to note 29).

 

Borrowing costs capitalised to property, plant and equipment amounted to USD 20,510 thousand (2015: USD 20,299 thousand) with a capitalisation rate in the range of 2.27% to 3.84% per annum (2015: 2.94% to 5.13% per annum).


13.  Investment properties


Land

Buildings and infrastructure

Under development

Total


USD'000

USD'000

USD'000

USD'000

Cost





As at 1 January 2015

-

-

-

-

Acquired through business combination

31,407

745,006

293,579

1,069,992

Additions during the year

-

108,307

-

108,307

Transfers

-

88,454

(88,454)

-

Transfer from/ (to) property, plant and equipment

 

-

 

28,327

 

(82)

 

28,245

Translation adjustment

(1,029)

-

(27)

(1,056)

As at 31 December 2015

30,378

970,094

205,016

1,205,488






As at 1 January 2016

30,378

970,094

205,016

1,205,488

Additions during the year

3,491

88,801

44,609

136,901

Transfers

-

11,716

(11,716)

-

Transfer from/ (to) property, plant and equipment

 

-

 

-

 

(270)

 

(270)

Disposals

-

-

-

-

Translation adjustment

(260)

-

(97)

(357)

As at 31 December 2016

33,609

1,070,611

237,542

1,341,762






Depreciation and impairment





As at 1 January 2015

-

-

-

-

Depreciation charge for the year

-

23,672

-

23,672

Transfer from property, plant and equipment

 

-

 

4,587

 

-

 

4,587

As at 31 December 2015

-

28,259

-

28,259






As at 1 January 2016

-

28,259

-

28,259

Depreciation charge for the year


33,178

-

33,178

As at 31 December 2016

-

61,437

-

61,437






Net book value:





As at 31 December 2015

30,378

941,835

205,016

1,177,229

As at 31 December 2016

33,609

1,009,174

237,542

1,280,325

                                                                                                                                                                                                                                                                                                                  

Land:

At 31 December 2016, the fair value of land was estimated to be USD 65,941 thousand (2015: USD 65,069 thousand) compared to the carrying value of USD 33,609 thousand (2015: USD 30,378 thousand).

 

Building and infrastructure:

At 31 December 2016, the fair value of buildings and infrastructure was USD 2,107,291 thousand (2015: USD 1,942,275 thousand) compared to the carrying value of USD 1,009,174 thousand (2015: USD 941,835 thousand). The buildings and infrastructure are constructed on a land for which the Economic Zones and Logistics park business obtained land use rights for a period of 99 years.

 

Investment properties under development:

Investment properties under development mainly include infrastructure development, staff accommodation and the convention centre complex in Jebel Ali Free Zone, UAE. These properties will be capitalised upon completion and their fair value cannot be reliably determined as the properties are currently under development.

 

Key assumptions used in determination of the fair value of investment properties

On an annual basis, the Group engages external, independent and qualified valuers who have the relevant experience to value such properties in order to determine the fair value of the Group's investment properties. The external valuation of the investment properties have been performed using income capitalization, comparable and residual methods of valuation. The external valuers, in discussion with the Group's management, have determined these inputs based on the current lease rates, specific market conditions and comparable benchmarking of rents and capital values and rentals in the wider corresponding market. The significant unobservable inputs used in the fair value measurement are as follows:



 

13.  Investment properties (continued)

 

·      Market rent (per square metre per annum)

·      Rent growth per annum

·      Historical and estimated long term occupancy rate

·      Yields, discount rates and terminal capitalization rates

 

The fair value of investment properties are categorised under level 3 hierarchy and the Group considers the current use of these properties as their highest and best use.

 

14.  Intangible assets and goodwill


Land use rights

Goodwill

Port concession rights and other intangible assets

Total


USD'000

USD'000

USD'000

USD'000

Cost





As at 1 January 2015

-

1,448,194

3,754,188

5,202,382

Acquired through business combinations

 

2,677,717

 

114,513

 

411,585

 

3,203,815

Additions

-

-

113,419

113,419

Disposals

-

-

(3,838)

(3,838)

Translation adjustment

-

(102,321)

(233,187)

(335,508)

As at 31 December 2015

2,677,717

1,460,386

4,042,167

8,180,270






As at 1 January 2016

2,677,717

1,460,386

4,042,167

8,180,270

Acquired through business combinations

 

-

 

61,519

 

498,400

 

559,919

Additions

-

-

87,502

87,502

Translation adjustment

-

(166,122)

(194,357)

(360,479)

As at 31 December 2016

2,677,717

1,355,783

4,433,712

8,467,212











Amortisation and impairment





As at 1 January 2015

-

-

974,920

974,920

Charge for the year

23,096

-

101,099

124,195

On disposals

-

-

(3,733)

(3,733)

Translation adjustment

-

-

(50,029)

(50,029)

As at 31 December 2015

23,096

-

1,022,257

1,045,353






As at 1 January 2016

23,096

-

1,022,257

1,045,353

Charge for the year

29,212

-

118,216

147,428

Translation adjustment

-

-

(14,707)

(14,707)

As at 31 December 2016

52,308

-

1,125,766

1,178,074






Net book value:





As at 31 December 2015

2,654,621

1,460,386

3,019,910

7,134,917

As at 31 December 2016

2,625,409

1,355,783

3,307,946

7,289,138

 

Port concession rights include concession agreements which are mainly accounted for as part of business combinations and acquisitions. These concessions were determined to have finite and indefinite useful lives based on the terms of the respective concession agreements and the income approach model was used for the purpose of determining their fair values. 

               

At 31 December 2016, port concession rights with a carrying amount of USD 11,790 thousand (2015: USD 146,535 thousand) are pledged to bank loans (refer to note 29).

 

 



 

15.  Impairment testing

 

Goodwill acquired through business combinations and port concession rights with indefinite useful lives have been allocated to various cash-generating units, for the purpose of impairment testing.

 

Impairment testing is done at an operating port (or group of ports) level that represents an individual CGU. Details of the CGUs by operating segment are shown below:


Carrying amount of goodwill

Carrying amount of port concession rights with indefinite useful life

Discount rates

Perpetuity growth rate


2016

2015

2016

2015




USD'000

USD'000

USD'000

USD'000



Cash-generating units aggregated by operating

segment







Asia Pacific and Indian

subcontinent

 

219,919

 

161,427

 

-

 

-

 

7.50% - 13.00%

 

2.50%

Australia and Americas

320,926

314,325

-

-

6.50% - 17.50%

2.50%

Middle East, Europe and

Africa

 

814,938

 

984,634

 

776,919

 

923,392

 

6.00% - 17.50%

 

2.50% -2.60%

Total

1,355,783

1,460,386

776,919

923,392



 

The recoverable amount of the CGU has been determined based on their value in use calculated using cash flow projections based on the financial budgets approved by management covering a three year period and a further outlook for five years, which is considered appropriate in view of the outlook for the industry and the long-term nature of the concession agreements held i.e. generally for a period of 25-50 years.

 

Key assumptions used in value in use calculations

The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill and port concession rights with indefinite useful lives.

 

Budgeted margins - The basis used to determine the value assigned to the budgeted margin is the average gross margin achieved in the year immediately before the budgeted year, adjusted for expected efficiency improvements, price fluctuations and manpower costs.

 

Discount rates - These represent the cost of capital adjusted for the risks associated with the cash flows of the CGU being valued. The Group uses the post-tax Weighted Average Cost of Capital that represents a market participant discount rate.

 

Cost inflation - The forecast general price index is used to determine the cost inflation during the budget year for the relevant countries where the Group is operating.

 

Perpetuity growth rate - In management's view, the perpetuity growth rate is the minimum growth rate expected to be achieved beyond the eight year period. This is based on the overall regional economic growth forecasted and the Group's existing internal capacity changes for a given region. The Group also takes into account competition and regional capacity growth to provide a comprehensive growth assumption for the entire portfolio.

 

The values assigned to key assumptions are consistent with the past experience of management.

 

Sensitivity to changes in assumptions

The calculation of value in use for the CGU is sensitive to future earnings and therefore a sensitivity analysis was performed. The analysis demonstrated that a 10% decrease in earnings for a future period of three years from the reporting date would not result in impairment. Similarly, an increase of 0.25% in discount rate and decrease of 0.25% in perpetuity growth rate would not result in impairment.

 


16.      Investment in equity-accounted investees

The following table summarises the segment wise financial information for equity-accounted investees, adjusted for fair value adjustments at acquisition and reconciled to the carrying amount of the Group's interest in equity-accounted investees as included in the consolidated statement of financial position:

                                                                                                                                                                                                                                                                                                                                                


Asia Pacific and Indian subcontinent

Australia and Americas

Middle East, Europe and Africa

Total


2016

2015

2016

2015

2016

2015

2016

2015


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000










Cash and cash equivalents

432,726

376,482

147,176

102,991

203,733

204,006

783,635

683,479

Other current assets

232,754

226,405

111,735

97,990

186,858

150,528

531,347

474,923

Non-current assets

6,167,755

7,092,949

2,146,178

2,078,861

2,459,574

2,440,019

10,773,507

11,611,829

Total assets

6,833,235

7,695,836

2,405,089

2,279,842

2,850,165

2,794,553

12,088,489

12,770,231










Current financial liabilities

-

10,780

595,272

84,154

37,734

36,187

633,006

131,121

Other current liabilities

317,386

350,156

170,598

200,634

249,081

199,323

737,065

750,113

Non-current financial liabilities

1,092,416

1,098,965

1,009,024

1,434,621

534,625

543,778

2,636,065

3,077,364

Other non-current liabilities

466,819

529,622

137,061

77,751

520,062

510,608

1,123,942

1,117,981

Total liabilities

1,876,621

1,989,523

1,911,955

1,797,160

1,341,502

1,289,896

5,130,078

5,076,579

Net assets (100%)

4,956,614

5,706,313

493,134

482,682

1,508,663

1,504,657

6,958,411

7,693,652

Group's share of net assets in equity-accounted investees







 

1,951,658

 

2,408,321










Revenue

1,489,325

1,424,458

599,720

594,147

587,559

533,198

2,676,604

2,551,803

Depreciation and amortisation

(292,542)

(300,714)

(107,201)

(120,351)

(93,828)

(67,130)

(493,571)

(488,195)

Other expenses

(605,441)

(582,931)

(410,974)

(416,822)

(448,606)

(408,382)

(1,465,021)

(1,408,135)

Interest expense

(70,090)

(89,844)

(241,971)

(305,295)

(42,015)

(23,688)

(354,076)

(418,827)

Other finance income

19,860

27,003

149,040

10,846

1,753

3,842

170,653

41,691

Income tax expense

(146,669)

(118,342)

(3,295)

802

25,503

(20,319)

(124,461)

(137,859)

Net profit/ (loss) (100%)

394,443

359,630

(14,681)

(236,673)

30,366

17,521

410,128

140,478










Group's share of profit/ (loss) (before separately disclosed items)

 

 

125,215

 

 

111,113

 

 

6,418

 

 

(67,978)

 

 

17,802

 

 

9,567

 

 

149,435

 

 

52,702

Dividends received

144,886

47,153

-

14,124

6,260

13,471

151,146

74,748

Group's share of other comprehensive income







3,416

(211)


17.  Accounts receivable and prepayments


           2016

2016

2015

2015


Non-current

Current

Non-current

Current


USD'000

USD'000

USD'000

USD'000






Trade receivables (net)

-

410,334

-

359,009

Advances paid to suppliers

-

81,966

-

62,010

Other receivables and prepayments

 137,789

220,515

56,496

252,778

Employee benefits assets (refer to note 20)

-

-  

60

-

Due from related parties (refer to note 25)

290,838

80,530

192,500

79,830

Total

428,627

793,345

249,056

753,627

 

The Group's exposure to credit and currency risks are disclosed in note 26.

 

18.  Cash and cash equivalents


2016

2015


USD'000

USD'000




Cash at banks and in hand

619,251

334,447

Short-term deposits

614,618

1,033,771

Deposits under lien

65,522

68,377

Cash and cash equivalents for consolidated statement of cash flows

1,299,391

1,436,595

 

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

 

The deposits under lien are placed to collateralise some of the borrowings of the Company's subsidiaries.

 

Cash flow information



2016

2015


Note

USD'000

USD'000

Cash flows from operating activities




Profit for the year


1,155,067

971,842

Adjustments for:




Depreciation and amortization

6

542,883

480,125

Impairment loss

6

776

653

Share of profit from equity-accounted investees (net of tax)


(146,478)

(52,702)

Finance costs

7

577,878

515,439

Gain on disposal of other investments


(3,878)

-

Gain on sale of property, plant and equipment

and port concession rights


 

(999)

 

(17,094)

Loss on disposal and change in  ownership of business


15,490

610

Finance income

7

(147,709)

(114,674)

Income tax expense

8

122,579

90,988

Gross cash flows from operations


2,115,609

1,875,187

 

19.  Employees' end of service benefits

Movements in the provision recognised in the consolidated statement of financial position are as follows:

2016

2015


USD'000

USD'000




As at 1 January

97,762

74,127

Acquired through business combinations

8,422

7,892

Provision made during the year *

17,647

25,897

Amounts paid during the year

(11,237)

(10,154)

As at 31 December

112,594

97,762

 

*The provision for expatriate staff gratuities, included in Employees' end of service benefits, is calculated in accordance with the regulations of the Jebel Ali Free Zone Authority. This is based on the liability that would arise if employment of all staff were terminated at the reporting date.

 

19.          Employees' end of service benefits (continued)

 

The UAE government had introduced Federal Labour Law No.7 of 1999 for pension and social security. Under this Law, employers are required to contribute 15% of the 'contribution calculation salary' of those employees who are UAE nationals. These employees are also required to contribute 5% of the 'contribution calculation salary' to the scheme. The Group's contribution is recognised as an expense in the consolidated statement of profit or loss as incurred.

 

20.           Pension and post-employment benefits

The Group participates in a number of pension schemes throughout the world.

a)             P&O UK Scheme

This principal scheme is located in the UK (the "P&O UK Scheme"). The P&O UK Scheme is a funded defined benefit scheme and was closed to routine new members on 1 January 2002 and to future accrual on 31 December 2015. The pension fund is legally separated from the Group and managed by a Trustee board. The assets of the scheme are managed on behalf of the Trustee by independent fund managers.

 

Formal actuarial valuations of the P&O UK scheme are normally carried out triennially by qualified independent actuaries, the latest regular valuation report for the scheme being at 31 March 2016, using the projected unit credit method. P&O is currently negotiating with the Trustees to agree to a monthly deficit payment plan.

In December 2007, as part of a process developed with the Group to de-risk the pension scheme, the Trustee transferred USD 1,600,000 thousand of P&O UK Scheme assets to Paternoster (UK) Ltd, in exchange for a bulk annuity insurance policy to ensure that the assets (in the Company's statement of financial position and in the Scheme) will always be equal to the current value of the liability of the pensions in payment at 30 June 2007, thus removing the funding risks for these liabilities.

 

b)             Merchant Navy Officers' Pension Fund ("MNOPF")

The Group participates in various industry multi-employer schemes, the most significant of which is the Merchant Navy Officers' Pension Fund (the "MNOPF Scheme") and is in the UK. These generally have assets held in separate trustee administered funds which are legally separated from the Group.

 

It is an industry wide multi-employer defined benefit scheme in which officers employed by companies within the Group have participated.

 

The scheme was divided into two sections, the Old Section and the New Section, both of which are closed to new members.

The Old Section completed a buy-out of all its members benefit obligations in July 2014, following which the Old Section was wound up. Therefore, no further liabilities were assigned to the Group in respect of the Old Section.

 

The most recent formal actuarial valuation of the New Section was carried out as at 31 March 2015. This resulted in a deficit of USD 3,703 thousand. The Trustee Board believe their investment strategy will address this deficit and therefore has not issued deficit contribution notices to employers in respect of the 2015 actuarial valuation. The New Section closed to future accrual in April 2016.

 

Following earlier actuarial valuations in 2009 and 2012 the Trustee and Employers have agreed contributions, which will be paid to the Section by participating employers over the period to 30 September 2023. These contributions include an allowance for the impact of irrecoverable contributions in respect of companies no longer in existence or not able to pay their share. The Group's aggregated outstanding contributions from these valuations are payable as follows: 2017 to 2020 USD 5,126 thousand per annum and 2021 to 2023 USD 961 thousand per annum.

 

The Trustee set the payment terms for each participating employer in accordance with the Trustee's Contribution Collection Policy which includes credit vetting.

The Group's share of the net deficit of the New Section at 31 December 2016 is estimated at 5.44%.

During the year, Group has accounted USD 90,111 thousand for an additional defined benefit obligation in regards to reapportionment of deficit contribution from a related party.



 

20.          Pension and post-employment benefits (continued)

 

c)             Merchant Navy Ratings' Pension Fund ("MNRPF")

The Merchant Navy Ratings' Pension Fund ("the MNRPF Scheme") is an industry wide multi-employer defined benefit pension scheme in which sea staff employed by companies within the Group have participated. The scheme has a significant funding deficit and has been closed to further benefit accrual.

 

Certain Group companies, which are no longer current employers in the MNRPF had settled their statutory debt obligation and were not considered to have any legal obligation with respect to the on-going deficit in the fund.  However, following a legal challenge, by Stena Line Limited, the High Court decided that the Trustees could require all employers that had ever participated in the scheme to make contributions to fund the deficit. Although the Group appealed, the decision was not overturned.

 

The most recent formal actuarial valuation was carried out as at 31 March 2014. The Group's deficit contributions arising from this valuation totalled USD 34,934 thousand (equating to 7.0% share of the net deficit). The contributions due to the Scheme will be paid over the period to 31 October 2022.  Deficit contributions of USD 13,500 thousand were paid into the Scheme in 2016. The Group's aggregated outstanding contributions from these valuations are payable as follows: 2017 to 2022 USD 4,378 thousand per annum

The Trustee set the payment terms for each participating employer in accordance with the Trustee's Contribution Collection Policy which includes credit vetting.

 

 

d)             Others

The Group also operates a number of smaller defined benefit and defined contribution schemes.

 

The board of a pension fund in the UK is required by law to act in the best interests of the fund participants and is responsible for setting certain policies (e.g. investment, contributions and indexation policies) and determining recovery plans if appropriate.

 

These defined benefit funds expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk. In addition, by participating in certain multi-employer industry schemes, the Group can be exposed to a pro-rata share of the credit risk of other participating employers.

 

Reconciliation of assets and liabilities recognised in the consolidated statement of financial position


2016

2015


USD'000

USD'000

Non-current



Defined benefit schemes net liabilities

313,980

179,136

Liability in respect of long service leave

406

475

Liability for other non-current deferred compensation

305

1,216


314,691

180,827

Current



Liability for current deferred compensation

8,185

10,009




Net liabilities

322,876

190,836




Net liabilities



Reflected in the consolidated statement of financial position as follows:



Employee benefits assets

(included within non-current receivables)

 

-

 

(60)

Employee benefits liabilities: Non-current

314,691

180,887

Employee benefits liabilities: Current

8,185

10,009



 

20.          Pension and post-employment benefits (continued)

 

Long term employee benefit expense recognised in consolidated statement of profit and loss consist of following:

 

2016

2015

 

USD'000

USD'000




Defined benefit schemes

6,617

8,200

Defined contribution schemes

10,215

11,500

Other employee benefits

11,623

14,758

Total

28,455

34,458

 

The re-measurements of the net defined benefit liability gross of tax recognised in the consolidated statement of other comprehensive income is as follows:


2016

2015


USD'000

USD'000




Actuarial gain/ (loss) recognised in the year

368,269

(81,210)

Return on plan assets lesser/ (greater) than the discount rate

(150,722)

59,900

Change in share in multi-employer scheme

(270)

(1,400)

Movement in minimum funding liability

(12,290)

28,700

 



Total

204,987

5,990

 

Actuarial valuations and assumptions

The latest valuations of the defined benefit schemes have been updated to 31 December 2016 by qualified independent actuaries. The principal assumptions are included in the table below. The assumptions used by the actuaries are the best estimates chosen from a range of possible actuarial assumptions, which, due to the timescale covered, may not necessarily be borne out in practice.


P&O UK scheme

MNOPF scheme

Other schemes

P&O

UK scheme

MNOPF

scheme

Other

schemes


2016

2016

2016

2015

2015

2015








Discount rates

2.50%

2.50%

2.70%

3.70%

3.70%

3.90%

Discount rates bulk annuity asset

2.40%

-

-

3.50%

-

-

Expected rates of salary increases

-*

-*

3.00%

-

-

3.20%

Pension increases:        







deferment

3.00%

2.50%

3.20%

2.80%

2.20%

3.00%

payment

3.00%

3.40%

3.20%

2.80%

3.10%

3.00%

Inflation

3.50%

3.50%

3.30%

3.20%

3.20%

3.20%

 

* The P&O UK Scheme and MNOPF were closed to future accrual as at 31 December 2016, so future pay increases is not relevant.



 

20.          Pension and post-employment benefits (continued)

 

The assumptions for pensioner longevity under both the P&O UK scheme and the MNOPF scheme are based on an analysis of pensioner death trends under the respective schemes over many years.

For illustration, the life expectancies for the two schemes at age 65 now and in the future are detailed in the table below.


Male

Female


Age 65

now

Age 65 in 20 years' time

Age 65

now

Age 65 in 20 years' time

2016





P&O UK scheme

22.3

 24.5

 24.3

 26.6

MNOPF scheme

23.0

 25.9

 26.4

 29.2






2015





P&O UK scheme

23.4

 26.5

 25.8

 28.9

MNOPF scheme

22.7

 25.6

 26.3

 29.3

 

At 31 December 2016 the weighted average duration of the defined benefit obligation was 17.3 years (2015: 15.8 years).

 

Reasonably possible changes to one of the actuarial assumptions, holding other assumptions constant (in practice, this is unlikely to occur, and changes in some of the assumptions may be correlated), would have increased the net defined benefit liability as at 31 December 2016 by the amounts shown below:


USD'000

0.1% reduction in discount rate

21,200

0.1% increase in inflation assumption and related assumptions

12,800

0.25% p.a. increase in the long term rate of mortality improvement

17,800

 

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

 

The schemes' strategic asset allocations across the sectors of the main asset classes are:


P&O UK scheme

MNOPF scheme

Other schemes

Group

schemes fair

value


USD'000

USD'000

USD'000

USD'000

2016





Equities

443,643

51,721

            79,866

575,230

Bonds

188,987

74,928

144,424

408,339

Other

27,404

-

19,504

46,908

Value of insured pensioner liability

984,557

-

-

984,557






Total

1,644,591

126,649

243,794

2,015,034






2015





Equities

453,937

81,065

95,885

630,887

Bonds

178,658

139,309

113,621

431,588

Other

30,677

-

33,790

64,467

Value of insured pensioner liability

1,131,211

-

-

1,131,211






Total

1,794,483

220,374

243,296

2,258,153

 

With the exception of the insured pensioner liability all material investments have quoted prices in active markets.


20.          Pension and post-employment benefits (continued)

 

Reconciliation of the opening and closing present value of defined benefit obligations for the period ended 31 December 2016 and 31 December 2015:

                                                                                                                                                                                                                                                                                                                          


P&O UK

scheme

MNOPF

scheme

Other

schemes

Total group

schemes

P&O UK

scheme

MNOPF

scheme

Other

schemes

Total group

schemes


2016

2016

2016

2016

2015

2015

2015

2015


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000










Present value of obligation at 1 January

(1,871,200)

        (220,700)

        (304,389)

(2,396,289)

(2,070,600)

(246,300)

(327,758)

(2,644,658)










Employer's interest cost

          (61,450)

            (7,293)

          (10,345)

         (79,088)

(71,200)

(8,600)

(11,722)

(91,522)

Employer's current service cost

-

-

            (2,836)

(2,836)

(500)

 -

(4,100)

(4,600)

Gain due to settlements

-

-

-

-

 13,500

 -

 -

 13,500

Contributions by scheme participants

-

-

(1,215)

(1,215)

 -

 -

(1,100)

(1,100)

Effect of movement in exchange rates

331,852

40,661

61,238

433,751

 98,800

 11,700

 15,981

 126,481

Benefits paid

91,298

9,994

11,210

112,502

 97,800

 10,900

 10,400

 119,100

Experience gains/(losses)on scheme liabilities

29,577

135

810

30,522

 35,600

 9,000

 5,000

 49,600

Change in share in multi-employer scheme

-

(3,376)

-

(3,376)

-

 -

 5,300

 5,300

Actuarial gain/(loss) on scheme liabilities

due to change in demographic assumptions

 

70,046

 

1,891

 

-

 

71,937

 

 -

 

 -

 

 1,910

 

 1,910

Actuarial gains/(losses) on scheme liabilities

due to change in financial assumptions

(353,710)

(45,109)

(71,909)

(470,728)

 25,400

 2,600

 1,700

 29,700










Present value of obligation at 31 December

(1,763,587)

(223,797)

(317,436)

(2,304,820)

(1,871,200)

(220,700)

(304,389)

(2,396,289)



 

20.          Pension and post-employment benefits (continued)

 

Reconciliation of the opening and closing present value of fair value of scheme assets for the period ended 31 December 2016 and 31 December 2015:

                                                                                                                                                                                                                                                                                                                       

 

 

P&O UK

scheme

MNOPF

Scheme

Other

schemes

Total

group

schemes

P&O UK

scheme

MNOPF

scheme

Other

schemes

Total

group

schemes


2016

2016

2016

2016

2015

2015

2015

2015


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000










Fair value of scheme assets at 1 January

1,794,483

220,374

243,296

2,258,153

1,987,492

215,900

246,500

2,449,892

Interest income on assets

59,019

7,293

8,508

74,820

 68,500

 7,600

 9,100

 85,200

Return on plan assets (lesser)/ greater than the

discount rate

 

187,457

 

(68,338)

 

31,603

 

150,722

(66,700)

 8,600

(1,800)

(59,900)

Loss due to settlements

-

-

-

-

(12,800)

 -

 -

(12,800)

Contributions by employer

11,345

5,672

19,853

             36,870

 13,200

 10,900

 16,200

 40,300

Contributions by scheme participants

-

-

1,215

1,215

 -

 -

 1,100

 1,100

Effect of movement in exchange rates

(314,254)

(31,464)

(48,391)

(394,109)

(94,809)

(11,026)

(12,504)

(118,339)

Benefits paid

(91,298)

            (9,994)

(11,210)

        (112,502)

(97,800)

(10,900)

(10,400)

(119,100)

Change in share in multi-employer scheme

-

3,646

-

3,646

 -

 -

(3,900)

(3,900)

Administration costs incurred during the year

(2,161)

(540)

(1,080)

(3,781)

(2,600)

(700)

(1,000)

(4,300)










Fair value of scheme assets at

31 December

1,644,591

126,649

243,794

2,015,034

 1,794,483

 220,374

 243,296

 2,258,153










Defined benefit schemes net liabilities

(118,996)

(97,148)

(73,642)

(289,786)

(76,717)

(326)

(61,093)

(138,136)

Minimum funding liability

-

(14,936)

(9,258)

(24,194)

 -

(30,500)

(10,500)

(41,000)










Net liability recognised in the consolidated statement of financial position at 31 December

 

(118,996)

 

(112,084)*

 

(82,900)

 

(313,980)

 

(76,717)

 

(30,826)

 

(71,593)

 

(179,136)

 

 

* This includes reapportionment of pension fund deficit contribution from a related party at the reporting date.


20.            Pension and post-employment benefits (continued)

 

A minimum funding liability arises where the statutory funding requirements are such that future contributions in respect of past service will result in a future unrecognisable surplus.

 

The below table shows the movement in minimum funding liability:-


2016

2015


USD'000

USD'000




Minimum funding liability as on 1 January

(41,000)

(13,400)

Employer's interest cost

(1,350)

(458)

Actuarial gain/ (loss) during the year

12,290

(28,700)

Effect of movement in exchange rates

5,866

1,558




Minimum funding liability as on 31 December

(24,194)

(41,000)

 


P&O UK scheme

MNOPF

scheme

Other

schemes

Total group schemes


USD'000

USD'000

USD'000

USD'000






Pension scheme contributions

10,369

5,678

11,233

27,280

It is anticipated that the Group will make the following contributions to the pension schemes in 2017:

 

21.            Accounts payable and accruals


2016

2016

2015

2015


Non-current

Current

Non-current

Current


USD'000

USD'000

USD'000

USD'000






Trade payables

-  

170,181

   -

   186,872

Other payables and accruals

112,047

1,420,813

   161,791

   1,288,002

Provisions*

1,313

56,767

   1,086

   95,195

Fair value of derivative financial instruments

278,767

6,144

   300,180

   6,224

Amounts due to related parties (refer to note 25)

-

9,904

   -

   38,287






As at 31 December

392,127

1,663,809

   463,057

   1,614,580

 

* During the current year, additional provision of USD 43,269 thousand was made (2015: USD 41,303 thousand) and an amount of USD 81,452 thousand was utilised (2015: USD 38,703 thousand).


22.            Non-controlling interests ('NCI')

The following table summarises the financial information for the material NCI of the Group:

                                                                                                                                                                                                                                                                                                                       


Middle East, Europe and Africa region

Asia pacific and Indian subcontinent

Other individually immaterial subsidiaries *

 Total

Middle East,

Europe and Africa region

Asia pacific and Indian subcontinent

Other individually immaterial subsidiaries *

Total


2016

2016

2016

2016

2015

2015

2015

2015


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Balance sheet information:









Non-current assets

302,327

472,361



313,730

-



Current assets

320,003

113,765



222,454

-



Non-current liabilities

(18,058)

(13,259)



(40,807)

-



Current liabilities

(48,773)

(21,761)



(73,058)

-



Net assets (100%)

555,499

551,106



422,319

-



Carrying amount of fair value adjustments excluding goodwill

 

-

 

186,545



 

-

 

-



Total

555,499

737,651



422,319

-












Carrying amount of NCI as at 31 December

370,597

250,580

100,657

721,834

281,795

-

85,969

367,764










Statement of profit or loss information:









Revenue

233,524

-



366,272

-



Profit after tax

130,174

-



115,953

-



Other comprehensive income, net of tax

2,994

-



5,385

-












Total comprehensive income (100%), net of tax

133,168

-



121,338

-



Profit allocated to NCI

86,798

-

44,015

130,813

74,183

-

14,728

88,911

Other comprehensive income allocated to NCI

1,996

-

(6,797)

(4,801)

3,487

-

(9,098)

(5,611)

Total comprehensive income attributable to NCI

88,794

-

37,218

126,012

77,670

-

5,630

83,300










Cash flow statement information:









Cash flows from operating activities

149,437

-



119,645

-



Cash flows from investing activities

(7,143)

-



(2,803)

-



Cash flows from financing activities

(50,877)

-



(53,123)

-












Dividends paid to NCI

-

-



-

-



 

* There are no material subsidiaries with NCI in the other operating segments of the Group.


 

23.            Business combinations

 

Acquisition of new subsidiaries

On 29 December 2016, DP World Group acquired an additional 23.94% stake in Pusan Newport Company Limited ("PNC") in South Korea from Samsung Corporation & Subsidiaries, increasing the shareholding in PNC to 66.03%.


Acquiree's carrying amount

Fair value recognised on acquisition


USD'000

USD'000

Assets



Property, plant and equipment

217,317

217,317

Port concession rights

252,297

498,400

Available-for-sale investments

1,110

1,110

Accounts receivables and prepayments

38,027

38,027

Inventory

7,456

7,456

Cash and cash equivalents

69,918

69,918




Liabilities



Employees' end of service benefits

(8,422)

(8,422)

Income tax liabilities

(6,276)

(6,276)

Deferred tax liabilities

(4,071)

(63,628)

Accounts payable and accruals

(16,251)

(16,251)




Net assets

551,105

737,651




Goodwill arising on acquisition


61,519




Total


799,170

 

If the acquisition had taken place at the beginning of the year, the profit of the Group would have increased by USD 21,828 thousand and revenue would have increased by USD 190,714 thousand.

 

24.            Significant group entities

The extent of the Group's ownership in its various subsidiaries, equity-accounted investees and their principal activities are as follows:

 

a)               Significant holding companies

 

Legal Name

Ownership interest

Country of incorporation

Principal activities

DP World FZE

100%

United Arab Emirates

Development and management of international marine and inland terminal operations

Thunder FZE

100%

United Arab Emirates

Holding company

The Peninsular and Oriental Steam Navigation Company Limited

100%

United Kingdom

Management and operation of international marine terminal operations

Economic Zones World FZE

100%

United Arab Emirates

Development, management and operation of free zones, economic zones, industrial zones and logistics parks

DP World Australia (POSN) Pty Ltd

100%

Australia

Holding company

DPI Terminals Asia Holdings Limited

100%

British Virgin Islands

Holding company

DPI Terminals (BVI) Limited

100%

British Virgin Islands

Holding company

DP World Ports Cooperatieve U.A.

100%

Netherlands

Holding company

DP World Maritime Cooperatieve U.A.

100%

Netherlands

Holding company

 

 

24.     Significant group entities (continued)

 

b)       Significant subsidiaries - Ports

 

Legal Name

Ownership interest

Country of incorporation

Principal activities

Terminales Rio de la Plata SA

55.62%

Argentina

Container terminal operations

DP World (Canada) Inc. (refer to note 34)

100%

Canada

Container terminal operations

DP World Prince Rupert Inc.

 (refer to note 34)

100%

Canada

Container terminal operations

DP World Saint John, Inc.

100%

Canada

Container terminal operations

DP World Sokhna SAE

100%

Egypt

Container terminal operations

Chennai Container Terminal

Private Limited

100%

India

Container terminal operations

India Gateway Terminal Private Ltd

81.63%

India

Container terminal operations

Mundra International Container Terminal Private Limited

100%

India

Container terminal operations

Nhava Sheva International Container Terminal Private Limited

100%

India

Container terminal operations

Nhava Sheva (India) Gateway Terminal Private Limited

100%

India

Container terminal operations

Dubai Ports World - Middle East LLC

100%

Kingdom of Saudi Arabia

Container terminal operations

DP World Maputo S.A.

60%

Mozambique

Container terminal operations

Qasim International Container Terminal Pakistan Ltd

75%

Pakistan

Container terminal operations

DP World Callao S.R.L.

100%

Peru

Container terminal operations

Doraleh Container Terminal S.A.

33.33%*

Republic of Djibouti

Container terminal operations

Integra Port Services N.V.

60%

Republic of Suriname

Container terminal operations

Suriname Port Services N.V.

60%

Republic of Suriname

General cargo terminal operations

Constanta South Container Terminal SRL

100%

Romania

Container terminal operations

DP World Dakar SA

90%

Senegal

Container terminal operations

Pusan Newport Co., Ltd (refer to note 23)

66.03%

South Korea

Container terminal operations

DP World Tarragona SA

60%

Spain

Container terminal operations

DP World Yarımca Liman İşletmeleri AS

100%

Turkey

Container terminal operations

DP World UAE Region FZE

100%

United Arab Emirates

Container terminal operations

DP World Fujairah FZE

100%

United Arab Emirates

Container terminal operations

London Gateway Port Limited

100%

United Kingdom

Container terminal operations

Southampton Container Terminals

Limited

100%

United Kingdom

Container terminal operations

Saigon Premier Container Terminal

80%

Vietnam

Container terminal operations

                                                                                                                                                                                      

                                                                                                                                                                                      


24.            Significant group entities (continued)

 

c)               Associates and joint ventures - Ports

 

Legal Name

Ownership interest

Country of incorporation

Principal activities

Djazair Port World Spa               

50%

Algeria

Container terminal operations

DP World DjenDjen Spa

50%

Algeria

Container terminal operations

DP World Australia (Holding) Pty Ltd

25%

Australia

Container terminal operations

Antwerp Gateway N.V

60%**

Belgium

Container terminal operations

Caucedo Investments Inc.

50%

British Virgin Islands

Container terminal operations

Empresa Brasileira de Terminais Portuarious S.A.

33.33%

Brazil

Container terminal operations

Eurofos SARL

50%

France

Container terminal operations

Generale de Manutention Portuaire S.A

50%

France

Container terminal operations

Goodman DP World Hong Kong Limited

25%

Hong Kong

Container terminal operations and warehouse operations

Visakha Container Terminals Private Limited

26%

India

Container terminal operations

PT Terminal Petikemas Surabaya

49%

Indonesia

Container terminal operations

Rotterdam World Gateway B.V.

30%

Netherlands

Container terminal operations

Qingdao Qianwan Container Terminal Co., Ltd

29%

People's Republic of China

Container terminal operations

Tianjin Orient Container Terminals Co., Ltd

24.50%

People's Republic of China

Container terminal operations

Yantai International Container Terminals Ltd

12.50%

People's Republic of China

Container terminal operations

Asian Terminals Inc

50.54%***

Philippines

Container terminal operations

Laem Chabang International Terminal Co. Ltd

34.50%

Thailand

Container terminal operations

 

d)               Other non-port business

 

Legal Name

Ownership interest

Country of incorporation

Principal activities





P&O Maritime Services Pty Ltd

100%

Australia

Maritime services

DP World Antwerp Terminals N.V.

100%

Belgium

Ancillary container services

DP World Germersheim GmbH and Co. KG

100%

Germany

Inland container terminal operations

DP World Germany B.V.

100%

Germany

Inland container terminal operations

Container Rail Road Services Pvt Limited

100%

India

Container rail freight operations

Empresa de Dragagem do Porto de Maputo, SA

25.50%

Mozambique

Dredging services

Port Secure FZCO

40%

Republic of Djibouti

Port security services

Remolcadores de Puerto y Altura, S.A.

57.01%

Spain

Maritime services

Dubai International Djibouti FZE

100%

United Arab Emirates

Port management and operation

Dubai Trade FZE

100%

United Arab Emirates

Trade facilitation through

integrated electronic services

P&O Maritime FZE

100%

United Arab Emirates

Maritime services

World Security FZE

100%

United Arab Emirates

Security services

Jebel Ali Free Zone FZE

100%

United Arab Emirates

Management, operation and development of free zones, economic zones and industrial zones

LG Park Freehold Limited

100%

United Kingdom

Management and operation of industrial parks

 



 

24.            Significant group entities (continued)

 

* Although the Group only has a 33.33% effective ownership interest in Doraleh Container Terminal SARL, this entity is treated as a subsidiary, as the Group is able to govern the financial and operating policies of the company by virtue of an agreement with the other investor.

 

** Although the Group has more than 60% effective ownership interest in this entity, it is not treated as a subsidiary, but instead treated as an equity-accounted investee. The underlying shareholder agreement does not provide control to the Group.

 

*** Although the Group has more than 50% effective ownership interest in this entity, it is not treated as a subsidiary, but instead treated as an equity-accounted investee. The underlying shareholder agreement does not provide control to the Group.

 

25.            Related party transactions

 

Business combinations under common control

On 16 March 2015, the Group acquired 100% ownership of EZW from its Parent Company. This business combination was accounted using acquisition method as prescribed under IFRS 3 - Business combinations.

 

Other related party transactions

Transactions with related parties included in the consolidated financial statements are as follows:


Ultimate Parent Company

Equity- accounted investees

Other related parties

Total

Ultimate Parent Company

Equity- accounted investees

Other related parties

Total


2016

2016

2016

2016

2015

2015

2015

2015