6 days ago - Identify and assess the risks of material misstatement of the consolidated financial statements, whether du
One Vision
“The race for excellence has no finish line.”
His Highness Sheikh Mohammed bin Rashid Al Maktoum Vice President and Prime Minister of the UAE and Ruler of Dubai 3
Our People Our diverse and dedicated workforce, consisting of 89 nationalities from across the globe have been the key driver of Transguard’s success. Our people continually strive to achieve our vision of becoming the organisation that changes the landscape of business support services in the region. We do this through our promise to our customers - to deliver operational excellence in everything we do – helping them to succeed, and to achieve their vision too.
The future is together
We invest in the recruitment and retention of the right talent and immediately set our employees on the path to succeed, providing opportunities for career progression through training and mentorship. The Transguard Centre of Excellence is testament to this commitment. The 38,000 square feet, open plan training centre aims to train 100,000 Transguard employees by 2020. In 2017-18, Transguard employee numbers grew 17% to 64,774 by 31 March 2018. To ensure that no employee is left behind we embarked on a transformative wellness and recreation programme seeing nearly 300 events taking place each month by the end of 2018, including launching the “Women of Inspiration” projects, a series of unique events designed especially for our female colleagues, by our female colleagues. On the International Day of Happiness, we launched an employee happiness video which generated 85k views in just 24 hours. During 2017-18, more than 1,300 employees were recognised through the Transguard employee awards scheme which rewards and recognises employees throughout the year for demonstrating their commitment to our company’s values:
T Team
R Relate
U Unique
S Safe
T Talent 5
Table of Contents Financial Highlights
10
Message from the Chairman, HH Sheikh Ahmed bin Saeed Al Maktoum
13
Message from the Chief Executive Officer, Dr. Abdulla Al Hashimi
15
Message from the Managing Director, Greg Ward
16
The Leadership Team
18
Our Services
20
- Transguard Cash Services
23
- Transguard Security Services
24
- Transguard Manpower Services
27
- Transguard Aviation and Logistics
28
- Transguard Workforce Solutions
30
- Transguard Integrated Facility Services
33
- Transguard Living
35
- Transguard Delivery Services
37
Dubai Government recognises Transguard’s Quality
38
#GrowWithTransguard
40
CSR: Dream 2020 Takes Flight
43
Health and Safety at the Heart of the Organisation
44
Breaking new Ground
46
A Year for the People 2017-2018
48
Financial Report 2017-2018
68
Financial Highlights
Financial Highlights Revenue AED ‘000s
Revenue Growth
2017-18 2016-17 2015-16
2,315,053 1,900,633 1,426,602
Transguard Group LLC Revenue and Results
22%
Revenue AED 000’s EBITDA AED 000’s EBITDA Margin %
Consolidated Profit AED ‘000s 2017-18
Operating Margin %
163,431
2016-17 2015-16
Operating Profit AED 000’s
146,041
Profit Attributable to the Owner AED 000’s Profit Margin %
2017-18
2017 - 18 64,774
125,128
Headcount growth
2,315,053 211,849 9% 174,617 8% 150,158 6% 64,774 22% 17%
Actual 2016-17 1,900,633 184,022 10% 154,609 8% 125,128 7% 55,399 33% 20%
Actual 2015-16 1,426,602 149,180 10% 129,873 9% 102,615 7% 46,500 38% 55%
2016 - 17 55,399
150,158
2016-17
10
Revenue Growth
123,514
Profit Attributable to the Owner AED
2015-16
Headcount
Headcount Growth
Actual 2017-18
2015-16 46,500
102,615 11
Message from the Chairman Transguard Group is a home-grown success story. Founded in 2001, as a Cash Management and Security Services provider, it has since flourished into one of the UAE’s most recognisable brands.
“Transguard Group is a home-grown success story.”
Since enhancing its service provision to include HR Outsourcing and Integrated Facility Services 13 years ago, the company has gone from strength-to-strength, consolidating its reputation in the market as a provider of the highest quality business support services in each of its business streams. As a recent recipient of the Dubai Quality Award, an external body recognising “Business Excellence”, Transguard remains in 2017-18 at the forefront of its industry and will continue to provide world-class services to the Emirates Group and more than 1,000 other customers.
His Highness Sheikh Ahmed bin Saeed Al Maktoum Chairman and Chief Executive, Emirates Airline and Group
13
Message from the CEO Transguard Group has recorded revenues of AED 2.3 billion (AED 2,315,053,294), representing a 22% year on year growth compared to 2016-17. Annual profit attributable to the owner increased by 20% for the financial year 2017-18. These are the highest recorded financial results in the company’s history. Every Transguard business unit reported growth in revenue this year and the workforce grew by 17% from 55,399 to 64,774 by 31 March 2018. Underpinning Transguard’s financial achievements in 2017-18 are the increase in new contract wins, a 51% year on year increase compared to the previous year, a focus on continuous improvement which resulted in 60% of all Managers been trained in Lean Six Sigma and the creation of the Transguard Centre of Excellence, a new training and innovation centre for its employees.
“We are on a mission to help our local economies and communities grow and prosper.”
In 2017-18, Transguard made considerable strides in its Corporate Social Responsibility programme including partnering with some of the UAE’s most respected charitable organisations such as the Emirates Red Crescent Society, Dubai Cares and the Al Ihsan Charity Association. In 2017 Transguard supported the Tarmeem Initiative, a project led by the Department of Economic Development and Ominyat, which involved the complete re-build and refurbishment of the Al Manzil school in Sharjah, a school for disadvantaged youth. Transguard provided 100 construction personnel, building materials and 50 volunteers over the course of two weeks to fast-track the project’s completion.
Dr. Abdulla Al Hashimi Chief Executive Officer
15
Message from the Managing Director This year we have been striving as a team to create an environment where Operational Excellence is embedded in the culture of the organisation. As the size of the workforce increased in 201718 to 64,774, it has been critical in the last financial year to ensure that our People Strategy was robust enough to honour our commitment of delivering Operational Excellence for our customers. As this year’s financial results show, our team have been successful in this aim, reporting AED 2.3 billion (AED 2,315,053,294) in revenue and AED 150 million (AED 150,158,318) in profit attributable to the owner, which represents 22% year on year growth in revenue and 20% growth in profit. Customer retention remains high, at 95% and we have increased new contract wins by 51% year on year to the value of over AED 1.3 billion. Our People Strategy is underpinned by the reconfiguration of our Career Framework which maps out the career pathway for every Transguard designation and the required skills and knowledge at each level. To support this upward mobility throughout the organisation the Centre of Excellence was created. Led by a team of 39 trainers, the Centre of Excellence is a state-of-the-art 38,000 square foot training centre with the capacity to train up to 450 personnel a day on 181 courses. Retaining and nurturing talent and promoting from within are the hallmarks of our operation and have been a critical success factor in 2017-18. The combination of high levels of customer satisfaction and high levels of employee engagement have created an environment for success where the organisation has been able to grow and achieve so much in the last 12 months.
Greg Ward
Managing Director
People First
“We want to create one of the most agile, educated and tech-savvy workforces in the region.”
His Highness Sheikh Ahmed bin Saeed Al Maktoum
Chairman and Chief Executive, Emirates Airline and Group
16
The Leadership Team
HH Sheikh Ahmed bin Saeed Al Maktoum
Dr Abdulla Al Hashimi
Greg Ward
Tony Lloyd
Stephen Beesley
Tim Mundell
Chairman and Chief Executive, Emirates Airline and Group
Chief Financial Officer
18
Chief Executive Officer
Chief Operating Officer Integrated Facility Services
Managing Director
Chief Security Officer
19
OUR
SERVICES
Cash Services 9% Revenue Growth 2% Workforce Growth Transguard’s Cash Services remains the market leader in cash management solutions. The business unit reported revenue growth of 9% year on year in 2017-18 and a workforce increase of 2%. Innovation, technology and strategic partnerships have been the key drivers of success in 2017-18.
Innovating the cash industry
Transguard’s exclusive partnership with global cash management provider Gunnebo has led to the introduction of automated ‘smart’ cash deposit machines across the UAE, a move that is transforming the cash management industry. The business unit launched its new state-of-the-art Command and Control Centre this year and broadened its scope to include 24/7 maintenance services in addition to its Managed Services and Cash-In-Transit (CIT) solutions. The additions to its portfolio enables financial institutions to have a single point-ofcontact for all their technology and servicing needs.
22
Security Services 25% Revenue Growth 12% Workforce Growth Transguard’s Security Services remains the country’s premier, tier one security provider with a workforce of 7,781 as of 31 March 2018. This year the business unit reported revenue growth of 25% year on year and a workforce increase of 12%. Transguard’s Security Services boasts a unique and extensive portfolio, from Explosive Detection Dogs (K9) to Systems Integration and Consulting, in addition to its long-standing manned guarding capability. Transguard’s Security Services puts technology and innovation at the core of its operations and in 2017-18 there has been a sharp increase in new contract wins that include security technology solutions such as ‘SmartGuard’ technology. This allows clients to have real-time information, images and video to support their security . In May 2017 Transguard Security Services was awarded Facility Management Middle East’s “Security Company of the Year”.
24
Your Security is our business
Manpower Services 28% Revenue Growth 12% Workforce Growth
Building on our continued success
Transguard’s Manpower Services continued its success in 2017-2018 with revenues growing by 28% year on year and the workforce growing by 12%. This year’s success is attributable to a growing number of construction and infrastructure projects taking place in the UAE and the success of new contract wins. There has been significant growth in the hospitality sector where clients are seeing demonstrable savings through their HR Outsourcing strategy as well a marked improvement in the quality of service through the provision of welltrained and well-managed outsourced personnel. Transguard provides a range of staff to support the effective operations of many flagship UAE hotels.
27
Aviation and Logistics Services 9% Revenue Growth 16% Workforce Growth Transguard’s Aviation and Logistics grew in revenue by 9% year on year and increased the workforce by 16% in 2017-18. Transguard continues to provide world-class services to the Emirates Group and dnata and has a significant presence at Dubai Airport and Al Maktoum Airports. The workforce peaked in 2017-18 and by 31 March 2017 employee numbers reached 8,056 personnel. Transguard won its first contract to provide Aviation Services to Etihad Airways. The move in to the logistics market has also been a key strategy in 2017-18 with Transguard winning contracts to provide services to UPS, Kuehne-Nagel, DHL and Freightworks.
28
Reaching new heights
Workforce Solutions 28% Revenue Growth 6% Workforce Growth Transguard’s Workforce Solutions reported 28% revenue growth year on year and a 6% increase in personnel. In October 2017 the HR Outsourcing division revamped its brand communications and extended its product offering to include onsite account management, temporary and permanent recruitment, PRO solutions and payroll services. The Outsourcing of white collar services has bridged the gaps in administrative work, HR and employee services, while freeing up clients’ human capital to focus on the core operations of their business. Additionally, this service has been increasingly popular with Small and Medium-sized Enterprises (SMEs), as the benefits of reducing overheads and the increase in efficiencies is realised.
30
Creating successful Partnerships
Delivering a world-class experience
Integrated Facility Services 30% Revenue Growth 24% Workforce Growth Transguard’s Integrated Facility Service reported revenue growth of 30% and an increase in personnel by 24%. Growth was largely driven by excellent customer retention including the renewal of many key flagship contracts. There has been significant growth of the team’s Projects division which delivers mechanical, electrical and plumbing (MEP) projects attracting a broader client base looking for more complex services. This year, Transguard was accredited by the National Inspection Council for Electrical Installation Contracting (NICEIC), the UK’s leading voluntary authority for electrical contractors. The accreditation positions Transguard as an ‘Approved Contractor’ and highly competent provider of electrical technicians that met the stringent standards required for health and safety procedures, extensive risk assessment undertakings and various training programs.
33
Transguard Living In January 2017, Transguard launched its first consumer facing business, Transguard Living. The proposition offers consumers an array of end to end home maintenance solutions, providing residential homes with professional cleaning, electrical and plumbing repairs, painting and moving services.
Entering the Consumer Market
The Transguard Living team are professionally trained to the highest industry standards. The appropriate cleaning courses are accredited by BICS, while also meeting Transguard Group’s internal standards. Customers currently enjoy a spectrum of over 30 home services, all backed up by a 24/7 Call Centre. In its first year, Transguard Living has grown consistently month-on-month, with an annual growth rate of 500%. With over 4,000 homes in the past year that have been cleaned, fixed and moved by Transguard Living, we are excited to ensure that this business continues to change the landscape in the quality of home services across Dubai. The ambition for the forthcoming financial year is to launch a suite of services under the arm of “Smart-Home” which will include services surrounding eco-saving energy solutions, and home automated solutions.
35
Transguard Delivery Services In July 2017 Transguard announced its expansion of its business delivery service, Transguard Delivery. In a strategic move, Transguard aimed to broaden its scope of work beyond its existing corporate customers providing a fully-tracked, pick-up and drop-off service across the UAE.
Joined multi-billion dollar UAE Courier market
As macroeconomic factors continued to weigh on SMEs and the wider business community this year, more and more businesses were outsourcing post and parcel services to streamline their operations, and Transguard had the capabilities and expertise to expand this service. Transguard will provide customers with a selection of delivery options across a 7 day service offering. The services include Express (4-Hours), Economy (same day) and Standard (next day) deliveries across the UAE The expanded service aimed to utilise Transguard’s 15 years’ experience of business post and parcel delivery by targeting organisations beyond Transguard’s current network of customers. Courier services have long been an important component of our business offering. Transguard aimed to build on our existing network of over 1,000 clients. Additional services included airport mishandled baggage collections for business customers; internal mail services for corporate customers; e-commerce collection and delivery; and business post and parcel delivery.
37
Dubai Government recognises Transguard’s quality Transguard Group, was honoured at the renowned Dubai Quality Awards and recognised by the Department of Economic Development for delivering business excellence across the organisation. Transguard excelled across all categories in an extensive judging process, which had criteria including business results, leadership skills for shaping the future of the business and ensuring the organisations ongoing success, as well as adopting and implementing a diverse range of employee initiatives to ensure learning and development. All of our staff are aligned with our business goals – providing quality service at every step of the client journey. This has resulted in reaffirming our position as a leader in cash management, security, manpower and integrated facility services and is the foundation for our future growth and expansion.
“Creating and fostering a culture of continuous improvement and business excellence has been key to Transguard’s enduring success.” Dr Abdulla Al Hashimi, CEO Transguard Group
38
#GrowWithTransguard Transguard’s AED 3.8 million 38,000 square foot, Centre of Excellence is fully capable of developing Transguard’s expanding workforce. The new facility will host training courses for up to 450 staff every day, with the centre expected to run a near-24/7 operation during peak business periods, to meet intense industry demand. Located in DIP between Emirates Road and Jebel Ali, and in close proximity to the Expo 2020 site, the twostorey centre comprises offices and classrooms on the first floor. On the ground floor several dedicated mockup rooms, including a purpose-built apartment, office, clinic and even a fully furnished hotel room complete with a variety of materials and finishes requiring different maintenance solutions and methods. The centre also features a K9 unit with kennels for 16 dogs to support Transguard’s specialist dog handling and detection training. Over 181 courses are being delivered, under nine key areas: Administration Skills, Hard Skills, Project Management Skills, Reporting Skills, Soft Skills, Software and Applications, Technical Skills, Transguard Leadership Skills and Transguard Management Skills. Additional courses range from Office Management, Document Control, Building Development and Critical Thinking, to Social Media Strategy, Team Building and Managing Safely. Courses in specialist cleaning, K9 handling and Lean 6 Sigma and English language courses are also delivered at the centre. Transguard’s English language training is benchmarked against the Common European Framework of Language, which leads to officially and internationally recognised qualifications. At the point of recruitment, all staff members are tested for their English proficiency and those who excel are encouraged to take an internationally recognised Cambridge University English exam, a process managed by five Cambridge University qualified English Language teachers. The language training centre also offers intensive language courses and 96-hour development courses, as well as a range of self-study and home-study opportunities.
38
Creating a culture of learning and development
Corporate Social Responsibility Transguard’s CSR Goal “Dream 2020”, set out to build and strengthen each of the four pillars of CSR: People, Community, Environment and Marketplace.
Usage of B5 biodiesel, which reduces 5% CO2
Dream 2020 takes flight
300 regular sporting competitions
Over 400 trees planted
7% Electricity saved on split AC’s
Team of 10 CSR representatives
22,817 kW of energy saved
1 million liters of water saved
2 employee Medical Centers
2 employee carnivals
50% reduction in office waste
27 Women of Inspiration events
1,252 employee health and well-being events
Think Green campaign launch
35 community projects
20,000 employee and family event spectators
41
Health and Safety Transguard’s Health and Safety strategy is at the core of everything we do, and this year we continued building on our efforts to create a world-class health and safety culture.
45%
Reduction in minor accidents
15
HSE Events organised
42
11%
Reduction in First Aid cases
0.1
Group AFR is maintained
0
Environmental incident
1,200
managers attended HSE training
ISO 14001:2015 certification complete
OHSAS 18001:2007 recertification awarded
Health and Safety at the heart of the organisation
Transguard builds “green compliant” employee accommodation with stateof-the-art facilities In 2017-18 Transguard began a two-year project to build two state-of-the-art employee accommodations that will meet the needs of Transguard’s growing workforce and Dubai’s Green Compliance framework. The first of the two builds is 160,000 sq. ft. and when completed, will house up to 10,000 Transguard employees. The building’s amenities will include purpose built central processing units (kitchens), solar panel technology, LED lightening, water efficiency fittings, an on-site medical center and gymnasium. The second accommodation will house 2,708 employees, and some of the more notable features include a communal dining area with numerous wide-screen TVs with multi-cultural channels and a library. There is also a nurses’ station, a prayer hall, a fully equipped gymnasium and a mini mart. Transguard has already invested over one million dirhams in two dedicated employee medical clinics, offering immediate access to quality medical facilities in cases of illness or accident within our biggest employee accommodations. This year Transguard moved 5,000 of its employees in to its newly acquired Al Tijarah residence which included a jogging track, basketball court and a volleyball court, as well as a recreation area with carrom boards, football and pool tables. In the community grounds surrounding the clusters, there is a full-size cricket pitch and a park. Other additional facilities due to come online include a supermarket, restaurants, a barber’s salon and an Internet café.
44
Breaking New Ground
A year for the people
20172018
Quarter 1
May 21 Inspired by Dubai’s 10X initiative
April 9
92 of Transguard’s facilities
management personnel carried out work at, the Al Manar Al Iman Charity School in Ajman
April 30
Partnership with Standard Chartered Bank to integrate Smart Cash Deposit Machines with Transguard’s cash-in-transit services 48
Transguard launches TG10X for its employees
June 5
Transguard’s HSE and CSR teams planted 65 saplings at our employee accommodations as part of World Environment Day
May 16
Transguard employees recognised in fmME’s “Unsung Hero of the Year” award category
49
May 16
Transguard Security Services wins the “Security Company of the Year” fmME award
May 16
fmMe Awards recognises Transguard’s Employee Medical Clinic in the “CSR Initiative of the Year” category
May 16
Transguard Security Services wins “Security Company of the Year” at the fmME awards 50
51
Quarter 2 July 19 Transguard hosts its annual Town Hall
August 23
August 23
Transguard’s HSE team completed their 3rd Annual Foreign object debris (FOD) seminar
CSR champions volunteering at the Manzil Center, Sharjah
July 23 Transguard organised 27 Iftars serving more than 30,000 meals at our employee accommodations
September 25 Integrated Facility Services and Transguard Living were proud participants at the FM Expo
August 28 Transguard participates in Hotelier Middle East’s Forum 2017 in Dubai
52
September 22 Transguard was awarded “Excellence in Training and Assessment within an International Accredited Training Organisation” at the BICSc Annual Awards 2017 53 49
Quarter 3 October 1
Transguard and Diebold Nixdorf form a strategic partnership for services and technology in the UAE
October 11 Transguard Group joined the Etisalat team at GITEX to sign a partnership agreement, whereby etisalat will be providing Transguard with state-of-the art facilities to support the monitoring of Transguard’s ICT infrastructure technology in the UAE
54
October 25
Launch of AED 3.8 Million Centre of Excellence
55
November 15 Workforce Solutions brand revitalisation launch
November 24 X-Factor fun at our Ladies Accomodation
November
Launch of Transguard Delivery Services, a fullytracked pick-up and drop-off service across the UAE 56
57
November 22 Transguard participated at the Al Noor Assistive TechX 2017 - an awareness initiative in the community
November 22
Transguard joined forces with Dubai Municipality for the 24th Anniversary of the “Clean Up The World” Dubai 2017 December 2 Transguard was proud to be supporting Emirates Airline Dubai Rugby Sevens, the biggest sporting event of the year.
December 4 Director Greg Ward ranks 8th in fmME’s Power 50
58
59
Quarter 4 January 5 Transguard was proud to be the Security Partner and Sponsor for the 2018 MEA Cash Cycle Seminar
February 5 Transguard’s IFS team celebrates with our Managing Director Greg Ward, at a client recognition event highlighting the team’s outstanding contribution in Cleaning and facility management
60
February 8 Dubai Police partnered with Transguard to provide a home security service to Dubai residents, which includes products such as burglar alarm systems, CCTV and Smart Home solutions
January 28
Kinberly Panlaqui launches our #GrowWithTransguard campaign
February 14 Transguard teamed up with Zia Medical Center and Emirates Group Security to hold free health checkups for employees on World Cancer Awareness Day
61
February 12 Transguard Group and Dubai Police sign a Memorandum of Understanding to share marketing best practice
February 22
Transguard win Expo 2020’s Cricket tournament February 15
Great turnout at Transguard’s 3rd Employee Olympic Games
62
63
March 7 The CSR team held a Women of Inspiration event in celebration of International Women’s Day.
March 30
Thousand of employees and their families turn out for Transguard’s flagship bi-annual carnival
March 11 March 16
A total of 1,360 staff enjoyed a day out at the Dubai International Cricket Stadium to watch their heroes in action during this years PSL cricket tournament
Transguard’s touch rugby team competed for charity in the Zurich 6’s Corporate Touch Rugby event 64
65
Financial Report 2017-2018
Directors’ report and consolidated financial statements for the year ended 31 March 2018 Directors’ report
1
Independent auditor’s report
2-3
Consolidated statement of financial position
4
Consolidated income statement
4
Consolidated statement of comprehensive income
4
Consolidated statement of changes in equity
5
Consolidated statement of cash flows
6
Notes to the consolidated financial statements
7-24
Directors’ report for the year ended 31 March 2018 The directors submit their report together with the audited consolidated financial statements of Transguard Group LLC (“the Company”) and its subsidiaries (together, “the Group”) for the year ended 31 March 2018.
Principal activities The principal activities of the Group are to provide secure cash and valuable logistics, integrated facility services, security guarding services, aviation security including accredited training and aircraft protection, security solutions and workforce solutions ranging from construction to professional services.
Results The results of the Group for the year ended 31 March 2018 are set out on page 7 of the consolidated financial statements
Directors The directors, who served during the year and upto the date of this report were:
Executive Director • Dr. Abdulla Al Hashimi representing dnata Non-executive Directors
• H.H. Sheikh Ahmed bin Saeed Al-Maktoum representing dnata • Hamad Jassim Al Darwish Fakhroo representing Al Hail Holding LLC • Mohammed Al Shaiba Saleh Ghannam Al Mazrouei representing Al Hail Holding LLC
Auditors The consolidated financial statements have been audited by PricewaterhouseCoopers who retire and, being eligible, offer themselves for re-appointment as auditors for the year ending 31 March 2019.
For and on behalf of the Board,
........................................... ...………………………… Gregory Ward Tony Lloyd Managing Director Chief Financial Officer
Independent auditor’s report to the shareholders of Transguard Group LLC Report on the audit of the consolidated financial statements
Our opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Transguard Group LLC (the “Company”) and its subsidiaries (together the “Group”) as at 31 March 2018, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.
What we have audited TThe Group’s consolidated financial statements comprise:
• • • • • •
the consolidated statement of financial position as at 31 March 2018; the consolidated income statement for the year then ended; the consolidated statement of comprehensive income for the year then ended; the consolidated statement of changes in equity for the year then ended; the consolidated statement of cash flows for the year then ended; and the notes to the consolidated financial statements, which include a summary of significant accounting policies.
Other information The directors are responsible for the other information. The other information comprises the Directors’ report (but does not include the consolidated financial statements and our auditor’s report thereon). Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a no material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
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 International Financial Reporting Standards and their preparation in compliance with the applicable provisions of the UAE Federal Law No. (2) of 2015 and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Basis for opinion
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.
Auditor’s responsibilities for the audit of the consolidated financial statements
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the ethical requirements that are relevant to our audit of the consolidated financial statements in the United Arab Emirates. We have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.
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 auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
30 April 2018
1
2
Consolidated statement of financial position
Independent auditor’s report to the shareholders of Transguard Group LLC (continued) Auditor’s responsibilities for the audit of the consolidated financial statements(continued) As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
•
• • •
• •
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
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.
2018 AED
Note
Further, as required by the UAE Federal Law No. (2) of 2015, we report that:
2017 AED
Non-current assets
ii.
the consolidated financial statements have been prepared and comply, in all material respects, with the applicable provisions of the UAE Federal Law No. (2) of 2015;
Property, plant and equipment
5
514,522,613
294,075,239
Intangible assets
6
66,421,078
66,609,989
the Group has maintained proper books of account;
iv.
the financial information included in the report of the Directors is consistent with the books of account of the Group;
v. vi. vii.
as disclosed in note 1 to the consolidated financial statements the Group has not purchased or invested in any shares during the year ended 31 March 2018;
Prepayments
8
117,786,729
118,704,139
698,730,420
479,389,367
Gross profit
Inventories
3,279,546
2,696,723
8
773,483,485
534,364,483
9
89,605,422
81,902,692
note 9 to the consolidated financial statements discloses material related party transactions and the terms under which they were conducted; and
Cash and bank balances
10
based on the information that has been made available to us, nothing has come to our attention which causes us to believe that the Group has contravened during the year ended 31 March 2017 any of the applicable provisions of the UAE Federal Law No. (2) of 2015 or in respect of the Company, its Articles of Association which would materially affect its activities or its financial position as at 31
Total Assets
17
2017 AED
2,315,053,294
1,900,632,976
(1,937,492,813)
(1,589,970,281)
377,560,481
310,662,695
March 2018.
Equity attributable to owners of the Company
35,924,248
23,706,396
902,292,701
642,670,294
1,601,023,121
1,122,059,661
Administrative expenses
18
(199,703,838)
(156,926,523)
Other (expenses)/income – net
20
Operating profit Finance costs
21
(3,239,534)
872,446
174,617,109
154,608,618
(11,186,044)
(8,567,662)
163,431,065
146,040,956
Owners of the Company
150,158,318
125,128,382
Non-controlling interests
13,272,747
20,912,574
163,431,065
146,040,956
Profit for the year
EQUITY AND LIABILITIES Profit attributable to:
EQUITY
Share capital
13
300,000
300,000
Legal reserve
14
150,000
150,000
Contributed capital
15
1,806,502
1,806,502
Retained earnings
468,945,820
348,735,502
Total equity attributable to owners of the Company
471,202,322
350,992,004
Non-controlling interests (“NCI”)
108,383,584
105,700,837
Total equity
579,585,906
456,692,841
Consolidated statement of comprehensive income Year Ended 31st March
LIABILITIES
Note
Non-current liabilities Borrowings
12
160,624,035
188,267,542
Provision for employees’ end of service benefits
16
101,274,738
81,306,807
261,898,773
269,574,349
377,089,678
241,888,433
Current liabilities Trade and other payables
11
Due to related parties
9
12,831,186
1,077,147
Borrowings
12
369,617,578
152,826,891
759,538,442
395,792,471
1,021,437,215
665,366,820
Total liabilities Total equity and liabilities
1,601,023,121
1,122,059,661
These consolidated financial statements were approved by the Board of Directors on 30 April 2018 and signed on its behalf by: ………………………....
Gregory Ward 3
2018 AED
Current assets
Trade and other receivables
Mohamed ElBorno Registered Auditor Number 946 Dubai, United Arab Emirates
Revenue Direct costs
Due from related parties
PricewaterhouseCoopers 30 April 2018
Year Ended 31st March Note
we have obtained all the information we considered necessary for the purposes of our audit;
iii.
Consolidated income statement
ASSETS
i.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
As at 31st March
Report on other legal and regulatory requirements
Profit for the year
2018 AED
2017 AED
163,431,065
146,040,956
Other comprehensive loss: Item that will not be reclassified to income statement: Remeasurement of retirement benefit obligations
(2,538,000)
(4,132,000)
160,893,065
141,908,956
Owners of the Company
148,210,318
121,653,882
Non-controlling interests
12,682,747
20,255,074
160,893,065
141,908,956
Total comprehensive income for the year
16
Attributable to:
.........………………........
Tony Lloyd Managing Director Chief Financial Officer The notes on pages 7 to 24 are an integral part of these consolidated financial statements
4
Consolidated statement of cash flows
Consolidated statement of changes in equity
Attributable to owners of the Company Share capital AED Balance at 1 April 2016 Profit for the year
Year End at 31st March
Legal reserve AED
Contributed capital AED
Retained earnings AED
Total AED
Non-controlling interests AED
Total equity AED
300,000
150,000
1,806,502
247,081,620
249,338,122
92,945,763
342,283,885
Profit for the year
-
-
-
125,128,382
125,128,382
20,912,574
146,040,956
Adjustments for:
Other comprehensive loss: Remeasurement of retirement benefit obligations
-
-
-
(3,474,500)
(3,474,500)
(657,500)
(4,132,000)
Total comprehensive income for the year
-
-
-
121,653,882
121,653,882
20,255,074
141,908,956
Transactions with owners Dividend (Note 23) Balance at 31 March 2017 Profit for the year
-
-
300,000
150,000
-
-
- (20,000,000) (20,000,000) 1,806,502 -
348,735,502 150,158,318
350,992,004 150,158,318
(7,500,000) (27,500,000) 105,700,837 13,272,747
Total comprehensive income for the year
-
-
-
(1,948,000) 148,210,318
(1,948,000) 148,210,318
(590,000) 12,682,747
Balance at 31 March 2018
163,431,065
146,040,956
-
300,000
150,000
-
(28,000,000)
(28,000,000)
1,806,502 468,945,820 471,202,322
(10,000,000)
Purchase of property, plant and equipment
5
(251,014,028)
(206,574,968)
6
(8,059,242)
(5,225,592)
22,105,140
Amortisation
6
8,248,153
7,308,371
Provision for employees’ end of service benefits
16
35,156,571
27,092,678
Proceeds from disposal of property, plant and equipment
Provision/Release of provision for impairment of trade receivables
18
17,355,535
(1,534,211)
Net cash used in investing activities
(346,057)
(331,827)
163,431,065
21
11,186,044
8,567,662
Loss on disposal of property, plant and equipment
20
996,791
592,110
(2,538,000)
Operating cash flows before payment of employees’ end of service benefits and changes in working capital
265,011,361 16
(17,726,640)
209,840,879 (12,019,660)
24
586,604
158,979
(258,486,666)
(211,641,581)
Cash flows from financing activities Repayment of borrowings
12
(243,542,677)
(216,774,290)
Drawdown of borrowings
12
423,846,578
392,000,918
Interest paid
21
(11,186,044)
(8,567,662)
Dividend paid
(38,000,000)
(27,500,000)
Net cash provided by financing activities
131,117,857
139,158,966
3,374,573
27,329,186
23,706,396
(3,622,790)
27,080,969
23,706,396
(38,000,000)
108,383,584 579,585,906
Inventories
Trade and other receivables net of movement in provision for impairment Due from related parties before movement in provision for impairment Trade and other payables Due to related parties Net cash generated from operating activities
The notes on pages 7 to 24 are an integral part of these consolidated financial statements
2017 AED
Purchase of intangible assets
28,983,259
Payments of employees’ end of service benefits
2018 AED
Cash flows from investing activities 5
Changes in working capital -
Note
Depreciation
18
160,893,065
Year End at 31st March
Cash flows from operating activities
Prepayments – non current
5
2017 AED
Finance costs
Transactions with owners Dividend (Note 23)
2018 AED
Release of provision for impairment of due from related parties
456,692,841
Other comprehensive loss: Remeasurement of retirement benefit obligations
Note
(582,823)
(1,466,087)
917,410
793,538
(256,474,538)
(124,344,579)
(7,356,673)
(4,245,160)
135,201,246
32,117,036
11,754,039
(864,166)
130,743,382
99,811,801
Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
10
The notes on pages 7 to 24 are an integral part of these consolidated financial statements 6
Notes to the consolidated financial statements for the year ended 31 March 2018
2.1.1
1
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 April 2017:
Legal status and activities
Transguard Group LLC (“the Company”) and its subsidiaries (Note 7) (together, “the Group”) provide secure cash and valuable logistics, integrated facility services, security guarding services, aviation security including accredited training and aircraft protection, security solutions and workforce solutions ranging from construction to professional services. The Company is a limited liability company incorporated in the United Arab Emirates under the UAE Federal Law No. (8) of 1984, as amended and operates under a trade licence issued in Dubai. This law has been superseded by UAE Federal Law No. 2 of 2015 effective 1 July 2015. The registered address of the Company is P. O. Box 22630, Dubai, United Arab Emirates. The share capital of the Company is owned equally by dnata, a company incorporated in the Emirate of Dubai, UAE, with limited liability, under an Emiri Decree issued on 4 April 1987. and Al Hail Holding LLC, a limited liability company, established and registered in the Emirate of Abu Dhabi. The ‘Transguard’ trademark, name and logo are held by dnata. The Group did not invest or purchase any shares during the year ended 31 March 2018.
2
Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The consolidated financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). These consolidated financial statements have been prepared under the historical cost convention. The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.
Changes in accounting policies and disclosures
New and amended standards adopted by the Group
•
Disclosure initiative – amendments to IAS 7
2
Summary of significant accounting policies (continued)
2.1
Basis of preparation (continued)
2.1.1
Changes in accounting policies and disclosures (continued)
There are no other IFRSs, amendments or IFRIC interpretations that are effective that would be expected to have a material impact on the Group’s consolidated financial statements.
New standards and interpretations not yet adopted by the Group (continued)
New standards and interpretations not yet adopted by the Group
•
Certain new accounting standards and interpretations, as detailed below, have been published that are not mandatory for 31 March 2018 reporting periods and have not been early adopted by the Group. The Group intends to adopt these standards as and when they become effective.
The IASB has issued a new standard for the recognition of leases. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. It will result in almost all leases being recognised on the consolidated statement of financial position, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The accounting for lessors will not significantly change. The mandatory date of adoption of the standard is 1 April 2019 for the Company.
(c)
The Group is in the process assessing the potential impact of the application of IFRS 16 on the amounts reported and disclosures made in these consolidated financial statements.
2.3
There are no other standards that are not yet effective that would be expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.
Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs are charged to the consolidated income statement during the financial period in which they are incurred.
•
IFRS 9, ‘Financial instruments’ (effective from 1 January 2018)
In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments (IFRS 9), which reflects all phases of the financial instruments project and replaces IAS 39 – Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The requirements of IFRS 9 will be adopted from 1 April 2018. IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under IAS 39. For trade receivables, a simplified approach is permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. Group has assessed the impact of IFRS 9 in relation to estimated expected credit loss for its Trade receivables. In order to perform the assessment, management has used historical information in relation to revenue, outstanding receivables at year end and impairment expense and calibrated it by using future economic guidance to estimate a provision matrix. Based on Group’s assessment, adoption of IFRS 9 will lead to an immaterial impact on expected credit losses in relation to consolidated financial statements. •
IFRS 15, ‘Revenue from contracts with customers’ (effective from 1 January 2018)
The IASB has issued a new standard for the recognition of revenue. This will replace 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 is transferred to the customer. The standard permits either a full retrospective or a modified retrospective approach for the adoption. The Group will adopt the new standard from 1 April 2018. Management assessed the impact of applying the new standard and does not expect any material impact on the Group.
IFRS 16, ‘Leases’ (effective from 1 January 2019)
2.2 Consolidation (a) Subsidiaries Subsidiaries are entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group. Inter-company transactions, balances, unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of financial position respectively.
(b)
Changes in ownership interests
The Group treats transactions with non-controlled interests that do not result in a loss of control as transactions with equity owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of the Company.
7
When the Group ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in consolidated income statement. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to consolidated income statement. If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to consolidated income statement where appropriate.
Acquisitions of entities under common control
Business combinations arising from transfers of interests in entities that are under the control of the Company are accounted using predecessor accounting. The assets and liabilities acquired are recognised at the carrying amounts on the date of acquisition and no adjustments are made to reflect the fair values. Any difference between the consideration given for the acquisition and carrying value of assets and liabilities acquired is recognised directly in equity. No goodwill is recognised as a result of the combination.
Property, plant and equipment
Land is not depreciated. Depreciation on other assets is computed using the straight-line method at rates calculated to allocate the cost of assets to their residual values over their estimated useful lives, as follows: Years Buildings Plant and machinery Furniture and fixtures
20 3 - 12 10
Computer and office equipment
4-6
Motor vehicles
5-6
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised within the consolidated income statement. Capital work in progress is stated at cost. When commissioned, capital work-in-progress is transferred to the appropriate property, plant and equipment category and depreciated in accordance with Group’s 8
2 Summary of significant accounting policies (continued) 2.4
Intangible assets
(a) Goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquire and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognised directly in the consolidated income statement. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Cash Generating Units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.
(b)
Computer software
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives ranging from five to eight years. Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:
• • • • • •
it is technically feasible to complete the software product so that it will be available for use; management intends to complete the software product and use or sell it; there is an ability to use or sell the software product; it can be demonstrated how the software product will generate probable future economic benefits; adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads. the appropriate intangible assets category and amortised in accordance with Group’s policy.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Computer software development costs recognised as assets are amortised over their estimated useful lives.
2 Summary of significant accounting policies (continued) 2.8
Impairment of financial assets
Capital work-in-progress is stated at cost. When commissioned, capital work-in-progress is transferred to
2.5
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to depreciation/amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of impairment at each reporting date.
2.6
Financial assets
(a)
Classification
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or a group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For loans and receivable category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement.
2.9 Inventories
The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of inventory comprises the cost of purchase and other costs incurred in bringing the inventory to its present location and condition. It excludes borrowing cost.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the reporting date. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables (excluding prepayments and advances to suppliers)’ (Note 8), ‘due from related parties’ (Note 9) and ‘cash and bank balances’ (Note 10).
Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
(b)
Trade receivables are amounts due from customers for services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Recognition and measurement
Loans and receivables are initially measured at fair value and subsequently carried at amortised cost using the effective interest method. Financial assets are derecognised when rights to receive cash flows have expired or have been transferred along with substantially all the risks and rewards of ownership.
2.7
2.10 Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
2.11 Cash and cash equivalents In the consolidated statement of cash flows, cash and cash equivalents include cash on hand, amounts held in bank accounts and bank overdrafts. In the consolidated statement of financial position, bank overdrafts are shown within borrowings in current liabilities.
2.12 Share capital Ordinary shares are classified as equity.
2.13 Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
2.14 Borrowings Bank borrowings are recognised initially at fair value, net of transaction costs incurred. Bank borrowings are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated income statement over the period of the bank borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are removed from the consolidated statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in income statement as other income or finance costs. Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised in income statement, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
Offsetting financial assets and liabilities
Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Capital work-in-progress is stated at cost. When commissioned, capital work-in-progress is transferred to the appropriate intangible assets category and amortised in accordance with Group’s policy.
9
10
2 Summary of significant accounting policies (continued) 2.15 Provision for employees’ benefits A provision is made for the estimated liability for employees’ employed in the UAE for their entitlements to annual leave and leave passage as a result of services rendered by the employees up to the reporting date. A provision is also made for the full amount of the end of service benefits, using actuarial techniques, due to employees in accordance with the UAE Labour Law. The Group employs a firm of independent actuaries to determine the value of employee benefits as at the reporting date, using actuarial techniques including the Projected Unit Credit Method. The present value of the employees’ end of service benefit liability is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. The liability for leave salary, leave passage and end of service benefits at the end of the year, and the charge for the year on account of these benefits have been recorded in line with the recommendations of the actuaries. The provision relating to annual leave and leave passage is disclosed as a current liability, while that relating to employees’ end of service benefits is disclosed as a non-current liability.
2.16 Provisions Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
2.17 Revenue recognition Revenue is measured at fair value of the consideration received or receivable for the services rendered in the ordinary course of the Group’s activities. The Group recognises revenue when the amount of revenue can be reliably measured; it is probable that future economic benefits will flow to the entity; and specific criteria have been met for the Group’s activity as described below.
2 Summary of significant accounting policies (continued)
(ii)
2.20 Foreign currency translation (continued)
(iii)
(b)
Revenue arising from services rendered is recognised when the services have been rendered to the customers based on contractual terms.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the consolidated income statement within ‘finance costs’. All other foreign exchange gains and losses are presented in the consolidated income statement within ‘other income - net’.
2.18 Leases
The results and financial position of the subsidiaries are included in the consolidated financial statements in AED which is also the subsidiaries’ functional currency.
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 (net of any incentives received from the lessor) are charged to the consolidated income statement on a straight-line basis over the period of the lease.
2.19 Dividend distribution Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Group, on or before the end of the reporting period but not distributed at the end of the reporting period.
2.20 Foreign currency translation (a)
Functional and presentation currency
Items included in the consolidated financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in United Arab Emirates Dirham (‘AED’), which is the Company’s functional and Group’s presentation currency.
(b)
Transactions and balances
The Group has no exposure to price risk as it has no price sensitive financial instruments.
Cash flow and fair value interest rate risk
The Group’s cash flow interest rate risk arises from its borrowings with variable interest rates.
Rendering of services
Operating leases
Price risk
Transactions and balances (continued)
The table below indicates the interest rate exposure on borrowings with variable interest rates at 31 March 2018 and 2017. The analysis calculates the increase/ (decrease) on the consolidated income statement of a reasonably possible movement in interest rate:
2017 AED
2016 AED
+100 basis points
4,356,680
3,422,435
-100 basis points
(4,356,680)
(3,422,435)
2.21 Borrowing costs General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Other borrowing costs are expensed in the period in which they are incurred.
3
Financial risk management
3.1
Financial risk factors
Interest Costs
The Group’s exposure to fair value interest rate risk arises from borrowings with fixed interest rates. Currently, the Group does not hedge the risk arising from its borrowings. However, the impact of fair value interest rate risk is not significant as majority of borrowings are based on variable interest rates.
(b)
Credit risk
The Group’s activity exposes it to a variety of financial risks: market risk (including foreign exchange risk, price risk and cash flow and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.
The Group is exposed to credit risk in relation to its monetary assets, mainly trade receivables (excluding prepayments and advances to suppliers), due from related parties and bank balances. The Group assesses the credit quality of the customer taking into account its financial position, past experience and other factors. It also has formal procedures to follow-up and monitor trade debtors.
(a)
Market risk
Cash at bank comprises of balances with commercial banks. Credit ratings of these commercial banks have been obtained from Moody’s Corporation (‘Moody’s’). The table below analyses the balances with the banks at the reporting date.
(i)
Foreign exchange risk
The Group’s exposure to foreign currency risk is minimal as the majority of its transactions are denominated in the Company’s functional currency.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated income statement.
11
12
3
Financial Risk Management (continued)
(c)
3.1
Financial risk factors (continued)
Prudent liquidity risk management includes maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit limits. Due to the dynamic nature of the underlying business, the Group maintains flexibility in funding by maintaining availability under committed credit lines.
(b)
Credit risk(continued) Moody’s Rating
2018 AED
2017 AED
Liquidity risk
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
A
baa3
18,057,142
875,944
B
A2
8,504,463
19,295,642
C
ba1
3,066,727
-
D
N/A
1,555,066
-
E
ba2
1,475,706
759,740
F
baa3
776,142
-
G
A3
639,793
159,156
H
baa3
336,695
505,354
I
ba1
334,462
759,495
J
N/A
328,378
328,628
K
A2
305,108
305,108
L
ba1
204,625
328,807
M
A3
-
10,900
35,584,307
23,328,774
The credit quality of trade receivables that are not impaired can be assessed by reference to historical information about counterparty default rates. 2018 AED
2017 AED
Less than 1 year AED
Counterparties without external credit rating *Group 1
51,360,220
15,441,612
**Group 2
282,341,538
149,510,350
333,701,758
164,951,962
Between 1 year and 2 years AED
Between 2 years and 5 years AED
Over 5 years AED
Contractual cash flows AED
Carrying Amount AED
3.2
Capital risk management
(b)
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain optimal capital structure to reduce the cost of capital.
Borrowings
379,839,027
72,742,780
85,410,257
85,410,257
552,916,774
530,241,613
Trade and other payables (excluding advances from customers)
372,289,615
-
-
-
372,289,615
372,289,615
12,831,186
-
-
-
12,831,186
12,831,186
Due to related parties
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings and financial lease liabilities (including current and non-current amounts as shown in the consolidated statement of financial position) less cash and bank balances. Total capital is calculated as ‘total equity’ as shown in the consolidated statement of financial position plus net debt. The gearing ratio at 31 March 2018 and 2017 was as follows:
At 31 March 2018
764,959,828
Less than 1 year AED
72,742,780
Between 1 year and 2 years AED
85,410,257
Between 2 years and 5 years AED
14,924,710
Over 5 years AED
938,037,575
Contractual cash flows AED
915,362,414
Carrying Amount AED
2018 AED
Borrowings
161,246,592
74,939,142
125,701,709
-
361,887,443
341,094,433
Trade and other payables (excluding advances from customers)
241,568,434
-
-
-
241,568,434
241,568,434
1,077,147
-
-
-
1,077,147
1,077,147
403,892,173
74,939,142
125,701,709
-
604,533,024
583,740,014
2017 AED
Borrowings (Note 12)
530,241,613
341,094,433
Less: cash and bank balances (Note 10)
(35,924,248)
(23,706,396)
Net debt
494,317,365
317,388,037
Total equity
579,585,906
456,692,841
Total capital
1,073,903,271
774,080,878
46%
41%
Gearing ratio
4
At 31 March 2017
Due to related parties
Trade receivables
Financial risk management(continued)
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend paid to shareholders, issue new shares or sell assets to reduce debt.
Banks
3
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Depreciation of property, plant and equipment
Management assigns useful lives and residual values to property, plant and equipment based on the intended use and the economic lives of those assets. Subsequent changes in circumstances could result in the actual useful lives or residual values differing from initial estimates. Where management determines that the useful life or residual value of an asset requires amendment, the net book amount in excess of the residual value is depreciated over the revised remaining useful life.
(c)
Provision for employees’ end of service benefits
The present value of employees’ end of service benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost for end of service benefits include the discount rate. Any changes in these assumptions will impact the carrying amount of end of service benefit obligations. The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the end of service benefit obligations. In determining the appropriate discount rate, the Group considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related end of service benefits obligation. Other key assumptions for end of service benefit obligations are based in part on current market conditions. Additional information is disclosed in Note 16.
(d)
Impairment assessment of goodwill
The Group tests annually whether the goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2.4. Management also assesses the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that are considered important which could trigger an impairment review include evidence that no profits or cash flows will be generated from the related asset. The recoverable amounts of cash generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (Note 6). If the budgeted cash flows used in the value-in-use calculation for the Group had been 5% lower than management’s estimates at 31 March 2018, the Group would not have recognised impairment on goodwill. If the estimated cost of capital used in the value-in-use calculation for the Group had been 1% higher than management’s estimates at 31 March 2018, the Group would not have recognised impairment on goodwill.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a)
Impairment of trade and other receivables
The impairment charge reflects estimates of losses arising from the failure or inability of the parties concerned to make the required payments. The charge is based on knowledge of customer’s business and financial standing, the customer’s ability and willingness to settle, the customer’s credit worthiness and the historic write-off experience. Changes to the estimated impairment charge may be required if the financial condition of the customers were to improve or deteriorate. Management considers that the current level of impairment charge is appropriate and consistent with the loss estimated at year end.
*Group 1 – new customers (less than 6 months). **Group 2 – existing customers (more than 6 months) with no defaults in the past.
The balances due from related parties (net of provision for impairment) are expected to be fully recovered based on the credit history and future cash flows of related parties. 13
14
5
Property, plant and equipment
6
Land and buildings AED
Plant and machinery AED
Furniture and fixtures AED
Computer and office equipment AED
Motor vehicles AED
Capital work in progress AED
Intangible assets
Total AED
Cost At 1 April 2016
4,021,982
42,642,283
41,823,484
23,846,185
50,221,194
23,468,219
186,023,347
137,299,010
17,719,155
16,787,605
5,962,085
16,849,573
11,957,540
206,574,968
Transfer
-
224,253
8,033,888
304,147
7,135,812
(15,698,100)
-
Disposals
-
-
(240,320)
(83,835)
(2,615,125)
-
(2,939,280)
Additions
Computer software AED
Capital work in progress AED
Goodwill AED
Total AED
51,628,886
1,890,625
36,032,634
89,552,145
3,504,465
4,554,777
-
8,059,242
936,214
(936,214)
-
-
56,069,565
5,509,188
36,032,634
97,611,387
22,942,156
-
-
22,942,156
8,248,153
-
-
8,248,153
As at 31 March 2018
31,190,309
-
-
31,190,309
Net book value as at 31 March 2018
24,879,256
5,509,188
36,032,634
66,421,078
40,237,722
8,056,197
36,032,634
84,326,553
As at 31 March 2017
141,320,992
60,585,691
66,404,657
30,028,582
71,591,454
19,727,659
389,659,035
Cost
Additions
119,490,548
35,525,185
8,792,971
5,280,417
2,823,309
79,101,598
251,014,028
At 1 April 2017
Transfer
-
3,545,974
547,917
240,643
-
(4,334,534)
-
Disposals
-
(1,287,862)
(127,142)
(1,010)
(5,674,316)
-
(7,090,330)
260,811,540
98,368,988
75,618,403
35,548,632
68,740,447
94,494,723
633,582,733
As at 31 March 2018
Additions Transfer As at 31 March 2018
Accumulated Amortisation
Accumulated Depreciation At 1 April 2016 Charge for the year Disposals As at 31 March 2017 Charge for the year
1,788,430
14,923,974
14,606,280
16,837,405
27,510,758
-
75,666,847
186,252
5,054,075
6,017,585
3,713,389
7,133,839
-
22,105,140
-
-
(44,188)
(20,987)
(2,123,016)
-
(2,188,191)
1,974,682
19,978,049
20,579,677
20,529,807
32,521,581
-
95,583,796 28,983,259
797,651
7,340,530
8,082,121
4,507,340
8,255,617
-
Transfer
-
5,908
(5,908)
-
-
-
-
Disposals
-
(438,075)
(79,600)
(1,010)
(4,988,250)
-
(5,506,935)
2,772,333
26,886,412
28,576,290
25,036,137
35,788,948
-
119,060,120
As at 31 March 2018
Net book value
At 1 April 2017 Charge for the year (Note 17)
Cost At 1 April 2016 Additions
4,849,799
375,793
-
5,225,592
Transfer
6,541,365
(6,541,365)
-
-
51,628,886
1,890,625
36,032,634
89,552,145
15,633,785
-
-
15,633,785
As at 31 March 2017
As at 31 March 2018
258,039,207
71,482,576
47,042,113
10,512,495
32,951,499
94,494,723
514,522,613
As at 31 March 2017
139,346,310
27,718,309
45,824,980
9,498,775
39,069,873
19,727,659
294,075,239 Accumulated Amortisation
Additions under land and building represents AED 85.6 million of labour camp building and AED 32 million of land.
At 1 April 2016
Certain buildings having a carrying amount of AED 1,861,050 (2017: AED 2,041,157) have been built over the leasehold land. The leases are expected to get renewed upon its expiry.
Charge for the year (Note 17)
7,308,371
-
-
7,308,371
As at 31 March 2017
22,942,156
-
-
22,942,156
Depreciation expense has been allocated as follows:
Net book value as at 31 March 2017
28,686,730
1,890,625
36,032,634
66,609,989
Note
2018 AED
2017 AED
Direct costs
17
16,384,781
12,374,165
Administrative expenses
18
12,598,478
9,730,975
28,983,259
22,105,140
Additional details on goodwill are disclosed in Note 24.
Assets held as collateral are explained under note 12. 15
16
7
Investment in subsidiaries
Summarised financial information for each subsidiary that has non-controlling interests is shown below:
On 2 February 2011, the Company incorporated a wholly owned subsidiary, Transguard Cash LLC (“TG Cash”) through transfer of specific assets and liabilities of the Company’s Cash Generating Unit (“Cash Services operation”) to TG Cash. Pursuant to its formation, the Company entered into a strategic alliance with Network International LLC, in order to facilitate the provision of ‘managed end-to-end Automated Teller Machines (“ATM”) services’ to the Group’s customers, through issuance of 50% equity interest in the TG Cash. This equity interest in TG Cash was issued for a cash consideration of AED 132,500,000. Currently, the share capital of TG Cash is owned equally by the Company and Network International LLC. However, as per a management agreement, the Company has the sole right to manage and the power to govern and control the financial and operating policies of TG Cash. On 3 September 2012, the Group incorporated a subsidiary, Transguard Themis LLC (“TG Themis”) and had a 51% controlling interest in TG Themis. On 1 April 2015, the Company acquired the remaining 49% controlling interest in TG Themis for a cash consideration of AED 190,310 (Note 25). On 30 June 2015, the Company acquired 99% controlling interest in CASS International Trading LLC (“CASS”) for a cash consideration of AED 35,000,000. The Group has 100% beneficial ownership of the subsidiary (Note 24). Subsidiary company
*Transguard Cash LLC
Percentage of equity owned by the Company
Percentage of equity owned by NCI
50%
50%
Percentage of beneficial interest owned by the Company
Principal activities
Country of incorporation
50%
Providing cash management services including secure and safe movement of cash and documents and ATM services to banks.
UAE
8
Trade and other receivables
Transguard Cash LLC 2018 AED
2017 AED
1%
100%
Providing white-collar recruitment services.
UAE
CASS International Trading LLC
99%
1%
100%
Providing training for aviation and security personnel
UAE
* It is considered a subsidiary as it is governed and controlled by the Company
2017 AED
568,450
4,403,865
3 to 6 months
1,153,374
1,153,374
Over 6 months
32,376,514
40,484,047
34,098,338
45,513,836
410,987,280
273,943,264
Current
Provision for impairment of trade receivables
(23,418,299)
(20,836,770)
Up to 3 months
Trade receivables – net
387,568,981
253,106,494
Assets
153,024,415
146,069,529
Liabilities
(55,174,525)
(29,063,331)
97,849,890
117,006,198
Assets
131,752,837
104,936,742
Liabilities
(12,686,747)
(10,392,454)
Total non-current assets/(liabilities) - net
119,066,090
94,544,288
Net assets
216,915,980
211,550,486
Total current assets – net Non-current
Revenue
Prepayments
233,412,986
218,208,751
Accrued income
199,214,299
133,648,233
Advances to suppliers
31,265,159
11,964,090
Other receivables
39,808,789
36,141,054
891,270,214
653,068,622
(117,786,729)
(118,704,139)
773,483,485 281,042,488
257,079,923
Profit for the year
26,545,494
41,825,147
Other comprehensive loss
(1,180,000)
(1,315,000)
Total comprehensive income
25,365,494
40,510,147
Total comprehensive income allocated to non-controlling interests
12,682,747
20,255,074
534,364,483
The Group’s customers are based in the UAE. At 31 March 2018, five customers (2017: five customers) accounted for 22% (2017: 29%) of the total trade receivables. Management is confident that this concentration of credit risk will not result in a loss to the business. As of 31 March 2018, trade receivables of AED 86,480,846 (2017: AED 72,346,270) were fully performing. Trade receivables of AED 290,408,096 (2017: AED 156,083,158) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivable is as follows:
Summarised cash flows Net cash generated from operating activities
All subsidiary undertakings are included in the consolidation.
2018 AED
Trade receivables
Long term portion of prepayments
99%
2017 AED
Summarised statement of financial position
Summarised income statement
Transguard Themis LLC
2018 AED
As of 31 March 2018, trade receivables of AED 34,098,338 (2017: AED 45,513,836) were potentially impaired and partially provided for. The amount of provision against the receivables was AED 23,418,299 (2017: AED 20,836,770). These receivables mainly relate to customers which are in difficult financial situations. It was assessed that a portion of the receivables is expected to be recovered. The ageing of these receivables is given below:
57,534,467
59,371,150
Net cash used in investing activities
(47,417,439)
(44,301,102)
Net cash used in financing activities
(10,000,000)
(15,000,000)
Net increase/(decrease) in cash and cash equivalents
117,028
70,048
Cash and cash equivalents at beginning of year
148,159
78,111
Cash and cash equivalents at end of year
265,187
148,159
2018 AED
2017 AED
225,210,333
140,838,143
3 to 6 months
30,221,041
15,147,464
Over 6 months
34,976,722
97,551
290,408,096
156,083,158
Up to 3 months
The carrying amount of the Group’s trade and other receivables at 31 March 2018 and 2017 are denominated in AED. Movement in the Group’s provision for impairment of trade receivables are as follows: 2018 AED
2017 AED
Opening balance
20,836,770
22,370,981
Provision / (reversal of provision) for impairment of trade receivables (Note 18)
17,355,535
(1,534,211)
(14,774,006)
-
23,418,299
20,836,770
Write off Closing balance
The creation and release of provision for impaired receivables during the year have been recognised in the consolidated income statement under ‘Administrative expenses’. Amounts charged to the provision account are written off when there is no expectation of recovering additional cash. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables. The fair values of trade and other receivables approximate to their carrying amounts as at 31 March 2018 and 2017. The Group does not hold any collateral as security. The other classes within trade and other receivables do not contain impaired assets. Included within trade and other receivables are ‘Prepayments’ and ‘Accrued income’ amounting to AED 127,960,655 (2017: AED 125,497,677) and AED 42,641,820 (2017: AED 34,106,232), respectively, pertaining to related parties, arising from transactions disclosed in Note 9.
The information above represents amounts before intercompany eliminations.
17
18
9
Related party balances and transactions
Related parties include Company’s shareholders, subsidaries, fellow subsidaries or Directors and businesses controlled by the shareholders, subsidaries, fellow subsidaries or Directors over which they exercise a significant management influence and key management personnel (“affiliates”). 2018 AED
Affiliates
Less: provision for impairment of due from related parties
2018 AED
2017 AED
721,799,135
686,244,311
Purchases from affiliates
11,571,023
9,845,175
Rent and utilities payment to affiliates
12,014,213
20,461,775
Sales to affiliates 88,851,299
80,528,651
816,575
1,782,550
89,667,874
82,311,201
(62,452)
(408,509)
89,605,422
81,902,692
Opening balance Reversal of provision for impairment of balances due from related parties upon collection (Note 18) Closing balance
408,509
740,336
(346,057)
(331,827)
62,452
408,509
Salaries and other benefits
dnata and entities related to dnata
12,831,186
1,077,147
7,605,372
7,664,291
147,982
154,416
7,753,354
7,818,707
The closing balances arising from certain transactions are shown under ‘Prepayments’ and ‘Accrued income’ in Note 8.
10
Cash and Bank Balances 2018 AED
2017 AED
339,941
377,622
Cash at bank
35,584,307
23,328,774
Cash and bank balances
35,924,248
23,706,396
Cash on hand Due to related parties
2017 AED
Trade payables
78,395,376
59,903,867
Accrued expenses
78,329,747
29,691,094
Provision for leave salary and leave passage
75,009,196
65,123,890
Balance at 1 April 2016
Accrued salaries
92,322,612
62,953,138
Cash flows Balance at 31 March 2017
Advances from customers
Key management compensation
Movement in the Group’s provision for impairment of balances due from related parties are as follows: 2017 AED
2018 AED
Other payables and accruals
End of service benefits
2018 AED
Trade and other payables
During the year, the Group entered into the following significant transactions with related parties in the ordinary course of business. These transactions were carried out at prices and on terms applicable to nonrelated parties for similar transactions.
2017 AED
Due from related parties dnata and entities related to dnata
11
Related party transactions
377,089,678
241,888,433
2018 AED
2017 AED
160,624,035
188,267,542
Term loans
2017 AED
2016 AED
Cash and bank balances
35,924,248
23,706,396
Bank overdraft (Note 12)
(8,843,279)
-
27,080,969
23,706,396
Borrowing due within one year (AED)
Borrowing due after one year (AED)
Total (AED)
(3,622,790)
(30,939,243)
(134,928,562)
(169,490,595)
27,329,186
(121,887,648)
(53,338,980)
(147,897,442)
23,706,396
(152,826,891)
(188,267,542)
(317,388,037)
3,374,573
(207,947,408)
27,643,507
(176,929,328)
27,080,969
(360,774,299)
(160,624,035)
(494,317,365)
Cash and and cash equivalents (AED)
Cash flows Balance at 31 March 2018
Liabilities from financing activities
The Group has undrawn facilities amounting to AED 638,028,573 (2017: AED 358,759,016). The movement in borrowings (excluding bank overdrafts) is as follows:
Non-current
2018 AED
2017 AED
Current
Opening balance
341,094,433
165,867,805
Term loans
Additions during the year
423,846,578
392,000,918
(243,542,677)
(216,774,290)
521,398,334
341,094,433
Revolving loans Trade finance Bank overdraft (Note 10)
66,061,818
41,369,276
225,000,000
75,000,000
Payments during the year
36,457,615
Closing balance
69,712,481 8,843,279
-
369,617,578
152,826,891
530,241,613
341,094,433
Cash and cash equivalents include the following for the purposes of the consolidated statement of cash flows: The carrying amounts of the Group’s borrowings are denominated in United Arab Emirates Dirham (‘AED’). Borrowings include term loans with repayment terms up to 7 years, short term revolving loans, and bank overdraft. The Group has complied with the financial covenants of its borrowing facilities during the years ended 31 March 2018 and 2017. Borrowings carry variable interest rates that are in line with current market terms. Net debt reconciliation Bank balances are held in current accounts with locally incorporated banks and branches of international banks.
Cash and bank balances (Note 10) Borrowings - due within one year (including bank overdraft) Borrowings - due after one year
19
319,999 23,896,445
12 Borrowings
Total borrowings
The above balances arose from transactions in the normal course of business and are unsecured, noninterest bearing and will be settled within 12 months.
4,800,063 48,232,684
Other assets
2018 AED
2017 AED
35,924,248
23,706,396
(369,617,578)
(152,826,891)
(160,624,035)
(188,267,542)
(494,317,365)
(317,388,037)
Cash and bank balances (Note 10)
35,924,248
23,706,396
Gross debt – variable interest rates
(530,241,613)
(341,094,433)
13
Share capital
Share capital comprises 300 (2017: 300) authorised, issued and paid up shares of AED 1,000 each amounting to AED 300,000 (2017: AED 300,000).
14
Legal reserve
In accordance with the UAE Federal Law No. (2) of 2015, and the Company’s Articles of Association, 10% of the net profit of the Company for the year is transferred to a non-distributable legal reserve. Such transfers are required to be made until the reserve is equal to at least 50% of the paid-up capital of the Company. Since the legal reserve of the Company is already equal to 50% of the share capital, no additional amounts have been transferred to the legal reserve during the year.
15
Contributed capital
Contributed capital represents amounts contributed by dnata and is not repayable.
20
16
Provision for employees’ end of service benefits
2018 AED
2017 AED
101,274,738
58,763,789
The movement in the net liability over the year is as follows:
Impact on employees’ end of service benefits liability Change in assumption
Opening balance
81,306,807
58,763,789
Charge for the year (Note 19)
35,156,571
27,092,678
2,538,000
4,132,000
-
3,338,000
Benefits paid
(17,726,640)
(12,019,660)
Closing balance
101,274,738
81,306,807
Remeasurement of retirement benefit obligations Acquisition*
Interest cost
2018 AED
2017 AED
31,387,571
24,367,996
3,769,000
2,724,682
35,156,571
27,092,678
Charge of AED 35,156,571 (2017: AED 27,092,678) (Note 19) was included in ‘direct costs’ and ‘administrative expenses’ amounting to AED 29,467,003 (2017: AED 23,237,959) and AED 5,689,568 (2017: AED 3,854,719) respectively. The principal actuarial assumptions were as follows:
Valuation discount rate Salary increase rate
2018 AED
2017 AED
4.6% per annum
4.7% per annum
5% per annum
5% per annum
Decrease by 1.68%
Increase by 1.72%
Salary increase rate
0.1%
Increase by 1.85%
Decrease by 1.85%
Sensitivity analysis of demographic assumptions: The sensitivity of the overall employees’ end of service benefits liability to changes in the principal demographic assumptions is as follows: Impact on employees’ end of service benefits liability
Withdrawal rate
10%
Increase in assumption
Increase by 0.55%
Decrease in assumption
20 2018 AED
2017 AED
135,054,273
122,775,011
Provision / (release of provision) for impairment of trade receivables (Note 8)
17,355,535
(1,534,211)
Depreciation (Note 5)
12,598,478
9,730,975
Rent
10,822,028
8,008,765
License fees
7,904,656
2,891,232
Fees and subscriptions
4,931,767
4,148,543
Information technology expenditure
2,746,418
1,994,575
Marketing expenses
2,363,531
2,140,233
Stationery and supplies
1,477,950
2,454,645
387,578
267,964
98,402
88,161
Release of provision for impairment of balances due from related parties (Notes 9)
(346,057)
(331,827)
Others
4,309,279
4,292,457
199,703,838
156,926,523
Staff costs (Note 19)
Office maintenance Business travel
Decrease by 0.55%
17
Direct costs 2018 AED
2017 AED
1,400,627,387
1,149,324,005
256,763,021
225,393,449
Fuel and transportation
77,919,599
59,451,341
Visa and immigration
46,914,038
36,589,990
Consumables
25,590,667
16,061,251
Staff costs (Note 19) Rent
Depreciation (Note 5)
16,384,781
12,374,165
Repairs and maintenance
14,422,225
14,209,175
Staff training expenses
10,755,468
7,316,434
Communication expenses
9,519,730
8,153,132
Uniforms
9,167,607
8,173,915
Amortisation (Note 6)
8,248,153
7,308,371
Insurance
5,690,799
4,912,501
55,489,338
40,702,552
1,937,492,813
1,589,970,281
Other (expenses) / income – net
Foreign exchange losses
2018 AED
2017 AED
(2,300,690)
(110)
(996,791)
(592,110)
57,947
1,464,666
(3,239,534)
872,446
2018 AED
2017 AED
11,186,044
8,567,662
2018 AED
2017 AED
34,515,916
25,283,596
751,728
3,479,585
Loss on disposal of property, plant and equipment Other income
21
Finance costs
Interest expense on borrowings
22
Contingencies and commitments
Guarantees Letters of credit
The above were issued by the banks in the normal course of business. No social contributions were made during the years ended 31 March 2018 and 2017.
Others
21
Decrease in assumption
0.1%
Change in assumption
The amounts recognised in the consolidated income statement are as follows:
Increase in assumption
Discount rate
*This represent new employees transferred to the Company during the year.
Current service cost
Administrative expenses
The sensitivity of the overall employees’ end of service benefits liability to changes in the principal financial assumptions is as follows:
Reconciliation of provision for employees’ end of service benefits:
Present value of employees’ end of service benefits
18
Sensitivity analysis of financial assumptions:
19
(a)
Staff costs
The Group leases office building and labour camps under non-cancellable operating lease agreements. The future minimum lease payments under the lease are as follows: 2018 AED
2017 AED
1,353,154,142
1,124,137,076
Leave salary and passage
79,537,722
63,832,174
End of service benefits (Note 16)
35,156,571
Salaries and wages
Other benefits
Operating commitments
2018 AED
2017 AED
Not later than 1 year
194,483,713
102,913,698
27,092,678
Later than 1 year and not later than 5 years
343,398,222
336,372,130
67,833,225
57,037,088
Over 5 years
516,175
40,058,142
1,535,681,660
1,272,099,016
538,398,110
479,343,970
23 Dividend Staff costs are allocated as follows: Direct costs (Note 17) Administrative expenses (Note 18)
1,400,627,387
1,149,324,005
135,054,273
122,775,011
1,535,681,660
1,272,099,016
Dividend of AED 28,000,000 (AED 93,333 per share) (2017: AED 20,000,000 – AED 66,667 per share) has been approved by the Board of Directors and paid during the year to the shareholders of the Company.
22
24
Business combination
On 30 June 2015, the Group acquired 100% beneficial ownership of CASS for a cash consideration of AED 35,000,000. The following table summarises the assets acquired and liabilities assumed and the non-controlling interest at the acquisition date:
Recognised amounts of identifiable assets acquired and liabilities assumed
Goodwill has been tested for impairment using value in use model. The recoverable amount has been determined using discounted cash flow projections. Management has adopted a 5 year period to assess its value in use. Cash flows beyond the 5 year periods are extrapolated using the estimated growth rates stated below.
Consideration paid
Less: net identifiable assets
Carrying value AED
35,000,000
-
Trade and other receivables
(835,209)
(835,209)
Cash and bank balances
(240,186)
(240,186)
Trade and other payables
2,108,029
2,108,029
Net identifiable liabilities acquired
1,032,634
1,032,634
36,032,634
-
Goodwill (Note 6)
Revenue and profit contribution
The accounting policies for financial instruments have been applied to the line items below:
Key assumptions used to determine the value in use include: 5% 6.75%
Growth rate: estimates are based on management’s assessment of market share having regard to forecasted economic growth in the UAE and the demand for CASS’s services. Discount rate: reflects the current estimated weighted average cost of capital (“WACC”) of the Group. Based on the value in use calculations no impairment of goodwill was identified. Management is of the opinion that it is unlikely there would be any material change in any of the key assumptions that would cause the recoverable amount of CASS to fall below its carrying value, after having given due consideration to the economic outlook and the commercial assumptions underpinning the cash flow forecasts of CASS.
If the acquisition had occurred on 1 April 2015, consolidated pro-forma revenue and profit for the year ended 31 March 2016 would have been AED 6,327,495 and AED 4,139,011 respectively. These amounts have been calculated using the CASS results and adjusting them for:
Less: cash and bank balances acquired
Total AED
626,592,069
-
626,592,069
89,605,422
-
89,605,422
Financial assets Trade and other receivables (excluding prepayments and advances to suppliers) Due from related parties Cash and bank balances
35,924,248
-
35,924,248
752,121,739
-
752,121,739
Borrowings
-
530,241,613
530,241,613
Trade and other payables (excluding advances from customers)
-
372,289,615
372,289,615
Due to related parties
-
12,831,186
12,831,186
-
915,362,414
915,362,414
422,895,781
-
422,895,781
Due from related parties
81,902,692
-
81,902,692
Cash and bank balances
23,706,396
-
23,706,396
528,504,869
-
528,504,869
Borrowings
-
341,094,433
341,094,433
Trade and other payables (excluding advances from customers)
-
241,568,434
241,568,434
Financial liabilities at amortised cost
Financial assets Trade and other receivables (excluding prepayments and advances to suppliers)
Financial liabilities at amortised cost
Purchase consideration – cash outflow
Cash consideration
Other financial liabilities AED
At 31 March 2018
differences in the accounting policies between the Group and CASS, and the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 April 2015.
Outflow of cash to acquire subsidiary, net of cash acquired
Loans and receivables AED
At 31 March 2017
The acquired business contributed revenues of AED 5,095,475 and net profit of AED 3,401,523 to the Group for the period from 1 July 2015 to 31 March 2016.
• •
Financial instruments by category
Key assumptions used in value in use calculations
Growth rate Discount rate Fair value rec-ognised on acquisition AED
26
AED 35,000,000
Due to related parties
-
1,077,147
1,077,147
-
583,740,014
583,740,014
(240,186) 34,759,814
23
24
Transguard Group Headquarters PO Box 22630 Dubai T: +971 (0)4 703 0500 UAE Toll Free Number: 800 1800
www.transguardgroup.com
[email protected]
Transguard Group PO Box 38897 Abu Dhabi T: +971 (0)2 446 3711