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Orascom Investment Holding S.A.E.
Consolidated Financial Statements
As of December 31, 2019 (IFRS)
Together with the Auditor's report
December 31, 2019
US
Auditor's Report
To The Board of Directors of Orascom Investment Holding (S.A.E)
Report on the Financial Statements
We have audited the consolidated financial statements of Orascom Investment Holding (S.A.E) which comprise the consolidated statement of financial position as at December 31, 2019, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the financial year then ended, and a summary of significant accounting policies and other explanatory notes.
Management's Responsibility for the Financial Statements
These consolidated financial statements are the responsibility of Company's management. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs), management responsibility includes, designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; management responsibility also includes selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Except as described in the Basis for Qualified Opinion paragraph, we conducted our audit in accordance with the Egyptian Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.
Basis for Qualified Opinion
As mentioned in detail in note no. (12), the Company's investment in Sarwa Capital -an associate- acquired during the last year and accounted for by the equity method, is carried at USD 104,677 thousands, on the consolidated statement of financial position as at December 31, 2019, also the Company's share of Sarwa Capital's net income of USD 5,023 thousands is included in Company's consolidated statement of profit or loss and other comprehensive income for the year then ended. The management didn't provide us with the financial information prepared in accordance with IFRSs, accordingly, We were unable to audit the carrying amount of the Company's investment in Sarwa capital as at December 31, 2019, and the Company's share of Sarwa Capital 's net income for the year then ended. Consequently, we were unable to determine whether any adjustments to these amounts were necessary.
Qualified Opinion
In our opinion, except for the effect of possible adjustments as might have been determined to be necessary for the matter described in the basis for qualified opinion paragraph, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Orascom Investment Holding) (S.A.E) as at December 31, 2019, and of its consolidated financial performance and its consolidated cash flows for the financial year then ended prepared in accordance with the International Financial Reporting Standards (IFRSs).
Emphasis of matter paragraph
Without considering the following as qualifications:
1. As mentioned in detail in note no. (34), during the first quarter of 2020, most countries of the world, including Egypt, were exposed to the outbreak of the novel coronavirus (COVID-19) pandemic, causing disruptions in most commercial and economic activities in general. Therefore, this is likely to have a significant impact on the assets, liabilities and financial performance of the Company's separate financial statements during the following periods, in addition to the potential impact on pre-determined operational plans and future cash flows associated with them, the Company's management is currently taking several measures to address this risk and reduce its impact on its separate financial position, but in light of the instability and uncertainty of the outcome of the current events, the magnitude of the impact of that event depends mainly on the estimate of the duration of these impacts. The implications and the Company's ability to achieve its plans to address this threat, which is difficult to determine in the present time.
2. As mentioned in detail in note no. (12), the Company has a significant influence in its investee "Koryolink" in North Korea, the investment is amounting to approximately USD 38 million as at December 31, 2019, Which the Company classified as investments in associate. Considering that Koryolink is operating under an international ban, operational and financial restrictions imposed by the international community, which lead to difficulties in transferring profits abroad and repatriate the funds to their home country
KPMG Hazem Hassan
Public Accountants and Consultants
Cairo October 1, 2020
ORASCOM INVESTMENT HOLDING | |||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||
** Restated | |||
(in thousands of US$) | Note | December 31, 2019 | December 31, 2018 |
Assets |
|
|
|
Property and equipment (net) | 14 | 73,279 | 80,941 |
Intangible assets (net) | 15 | 24,510 | 33,851 |
Investment Property (net) | 16 | 60,747 | 64,290 |
Investments in associates | 12 | 143,078 | 123,439 |
Other non-current financial assets | 17 | 17,381 | 14,086 |
Other Non current assets | 20 | 16,574 | 13,224 |
|
|
|
|
Total non-current assets | 335,569 | 329,831 | |
Inventories Trade receivables 19 Other current financial assets 17 Other current assets 20 Cash and cash equivalents 21 Assets held for sale 32 |
506 54,779 4,940 13,461 63,438 13,850 |
413 53,269 105,126 11,114 106,565 - | |
Total current assets | 150,974 | 276,487 | |
Total Assets | 486,543 | 606,318 | |
Equity and Liabilities Share capital 22 Other reserves Retained earnings |
366,148 (142,231) 36,773 |
366,148 (160,523) 65,216 | |
Equity attributable to equity holders of the Company | 260,690 | 270,841 | |
Non-controlling interest | 16,861 | 18,738 | |
Total equity | 277,551 | 289,579 | |
Liabilities Non-current borrowings 23 Other non-current liabilities 24 Deferred tax liabilities 18 |
24,007 7,642 12,450 |
58,803 25,844 15,265 | |
Total non-current liabilities | 44,099 | 99,912 | |
Current borrowings 23 Trade payables and other current liabilities 24 Income tax liabilities Current provisions 25 Liabilities associated to assets held for sale 32 | 47,485 74,466 5,806 29,862 7,274 | 111,322 74,988 7,476 23,041 - | |
Total current liabilities | 164,893 | 216,827 | |
Total liabilities | 208,992 | 316,739 | |
Total Equity and Liabilities | 486,543 | 606,318 | |
Chief Financial Officer DExecutive Chairman and Managing
Director
Khalid Ellaicy Naguib Sawiris
Auditor's report 'attached'
(The notes 1 to 35 are an integral part of these Consolidated Financial Statements)
** Restatement to correct the translation reserve and retained earnings for the year ended December 31, 2018 (Note No. 35).
1
ORASCOM INVESTMENT HOLDING
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
(in thousands of US$, except per share amounts) Note
Continued operations
Revenues 6
Other income
Purchases and services 7
Other expenses 8
Personnel cost 9
Depreciation and amortization 10
Impairment charges
Disposal of non-current assets
Operating income/ (loss)
Financial income 11
Financial expense 11
Foreign exchange (loss) 11
Share of profits of investment in associates 12
Impairment of investments in associate 12
(loss)/Profit before income tax
Income tax expense 13
(Loss)/ Profit for the year
Discontinued operations
(Loss) from discontinued operation (net of income tax) 27
(Loss) for the year
Other comprehensive (loss):
Items that may be sequent reclassified to profit or loss net of tax
Change in fair value of investments Currency translation differences
Total comprehensive (loss) for the year (Loss) for the year attributable to: Owners of the company
Non-controlling interests
Total comprehensive (loss) attributable to: Owners of the parent
Non-controlling interest
Total comprehensive income for the year
Earnings per share from continuing operations - basic and diluted (in US$) 26
Earnings per share from discontinued operations - basic and diluted (in US$) 26
Chief Financial Officer D DExecutive Chairman and Managing Director
Khalid Ellaicy Naguib Sawiris
(The notes 1 to 35 are an integral part of these Consolidated Financial Statements)
** Restatement to correct the translation reserve and retained earnings for the year ended December 31, 2018 (Note No. 35).
ORASCOM INVESTMENT HOLDING CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
(in thousands of US$)
As at December 31, 2017 Restatement Effect of IFRS15 / IFRS 9 As at January 1, 2018
Total comprehensive (loss)/ income for the period
Currency translation differences Change in fair value of investments (Loss) for the year
Total comprehensive (loss)/Income for the year Transactions with owners of the company Transferred to Legal reserve
Derivatives Other reserves
Change in the scope of consolidation-In coming Total transactions with owners of the company As of 31 December 2018 (Restated)
- -
(in thousands of US$)
As of January 1, 2019 as issued
**Restatement on prior year
As of January 1, 2019 **restated
Total comprehensive (loss)/ income for the year
Currency translation differences Change in fair value of investments (Loss) for the year
Total comprehensive (loss) for the year Transactions with owners of the company Transferred to Legal reserve
Derivatives revaluation
Change in minority interest of subsidiaries Change in the scope of consolidation-In coming Total transactions with owners of the company As of 31 December 2019
- - -
Chief Financial Officer D Executive Chairman and Managing Director
Khalid Ellaicy Naguib Sawiris
(The notes 1 to 35 are an integral part of these Consolidated Financial Statements)
** Restatement to correct the translation reserve and retained earnings for the year ended December 31, 2018 (Note No. 35).
ORASCOM INVESTMENT HOLDING CONSOLIDATED STATEMENT OF CASH FLOWS FOR
Represented
(in thousands of US$)
(Loss)/ profit for the year before tax
Adjustments for
Depreciation, amortization and impairment charges Interest expense
Finance income Foreign exchange loss
Impairment of financial assets (Loss) / Gain form disposal of assets Share of profit of associate Impairment of associate
Changes in other assets Change in deferred income Changes in other liabilities
Cash flows (used in) operating activities
Income taxes paid Interest collected Dividends to employees
Net Cash flows (used in) operating activities
Cash out flow for investments in Property and equipment Intangible assets
Acquisitions of new investments Change in Deposits and financial assets Proceeds from disposal of
Property and equipment Intangible assets
Other Financial Assets
Cash collected from sales of investment Cash flows (used in) investing activities Cash flows from financing activities Interest Paid
Proceeds from loan and bank facilities Payments for loans and bank facilities Cash collected from time deposit at bank Cash collected from pledget time deposits Change in restricted deposits
Cash flows (used in) / generated by financing activities Net cash (used in) continuing operations
Discontinued operations
Net cash (used in) / generated by operating activities Net cash generated by investing activities
Net cash (used in) Financing activities
Net cash (used in) / generated by discontinued operations
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the period Effect of exchange rates on cash and cash equivalents Cash and cash equivalents at the end of the year
Chief Financial Officer Executive Chairman and Managing Director Khalid Ellaicy Naguib Sawiris
(The notes 1 to 35 are an integral part of these Consolidated Financial Statements)
1. General information
Orascom Investment Holding S.A.E.("OIH" or the "Company") is a joint stock company with its head office in Cairo, Egypt. The Company was established on November 29, 2011 (the "inception") and until this date the businesses of the Company were performed under various entities which were controlled by Orascom Telecom Holding, S.A.E. ("OTH"). As part of a larger transaction pursuant to which VimpelCom Ltd had acquired OTH, its shareholders agreed to affect the demerger, whereby, OTH was split into two companies, OTH and the Company ("Demerger"). The Demerger resulted in the transfer of certain telecom, cable and media and technology assets (the "OIH Assets") to the Company.
The Company and the OIH Assets (together the "Group") are a mobile telecommunications business operating in high growth emerging markets in the Middle East, Africa and Asia. The Company is a subsidiary of Orascom Telecom Media and Technology Investments S.à.r.l. (the "Ultimate Parent Company").
The Company's shares are listed on the Egyptian Stock Exchange and its GDRs are listed on the London Stock Exchange.
The information presented in this document has been presented in thousands of United States Dollar ("US$"), except earnings per share and unless otherwise stated.
The consolidated financial statements as of and for the year ended 31 December 2019 (the "Consolidated Financial Statements") were approved for issue by the Board of Directors of the Company on October 1, 2020.
2. Significant accounting policies
2.1 Basis of preparationThese Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and its interpretations as adopted by the International Accounting Standards Board ("IASB") and all interpretations of the International Financial Reporting Interpretations Committee ("IFRIC") and all interpretations of the Standing Interpretations Committee ("SIC"). The IFRS were applied consistently to all the periods presented in this document.
The Consolidated Financial Statements have been prepared on a going concern basis, as Management have verified the absence of financial, management or other indicators that could indicate critical issues regarding the Group's ability to meet its obligations in the foreseeable future, and in particular in the next 12 months. The description of the methods through which the Group manages financial risks is contained in the following note 4 relating to "Financial risk management".
The Consolidated Financial Statements have been prepared under the historical cost basis except for certain financial assets and liabilities, including derivative instruments that are measured at fair value.
For presentational purposes, the current/non-current distinction has been used for the statement of financial position. The statement of comprehensive income is presented using the one-statement approach, dividing items of comprehensive income between a separate income statement and a separate statement of comprehensive income. Expenses are analysed in the income statement using a classification based on their nature. The indirect method has been selected to present the cash flow statement.
The Consolidated Financial Statements have been prepared on the basis of the conventional historical cost method, except for the valuation of financial assets and liabilities, in which case the application of the criterion is mandatory fair value.
2.2 Application of new and revised International Financial Reporting Standards ("IFRSs")
2.2.1 New currently effective requirements
Effective date | New standards or amendments |
January 1, 2019 | IFRIC 23 Uncertainty over Income Tax Treatments |
January 1, 2019 | Prepayment Features with Negative Compensation (Amendments to IFRS 9) |
January 1, 2019 | Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) |
January 1, 2019 | Plan Amendments, Curtailment or Settlement (Amendments to IAS 19) |
January 1, 2019 | Annual Improvements to IFRSs 2015-2017 Cycle (Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23) |
|
|
IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments
The Group adopted IFRIC Interpretation 23 - Uncertainty over Income Tax Treatments. The interpretation provides provides specific guidance to recognise and measure the accounting impact of tax uncertainties which IAS 12 did not address. Particularly, IFRIC 23 specifies how to determine the unit of account and the recognition and measurement guidance to be applied to that unit, as well as when to reconsider the accounting for a tax uncertainty. The interpretation is effective on or after January 1, 2019. The Group has reviewed its previously designed model to account for tax uncertainties and assessed that it is consistent with the more specific IFRIC 23 requirements.
Amendments to IFRS 9 - Financial Instruments
The Group adopted Amendments to IFRS 9 - Financial Instruments. These amendments allow, under certain conditions, for a prepayable financial asset with negative compensation payments to be measured at amortized cost or at fair value through other comprehensive income. The amendments also contain a clarification relating to the accounting for a modification or exchange of a financial liability measured at amortized cost that does not result in the derecognition of the financial liability. The amendments are effective on or after January 1, 2019. There was no effect from the adoption of these amendments.
Amendments to IAS 28 - Long-term Interests in Associates and Joint Ventures
The Group adopted Amendments to IAS 28 - Long-term Interests in Associates and Joint Ventures. These amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied. The amendments are effective on or after January 1, 2019. There was no effect from the adoption of these amendments.
Amendments to IAS 19 - Employee Benefits
The Group adopted Amendments to IAS 19 - Employee Benefits. These amendments require that when there is a change to a defined benefit plan (an amendment, curtailment or settlement) the company use the adopted assumptions from the remeasurement of a net defined benefit liability or asset to determine current service cost and net interest for the remainder of the reporting period after the change to the plan. The amendments are effective on or after January 1, 2019. There was no effect from the adoption of these amendments.
Annual Improvements to IFRSs 2015-2017 Cycle
The Group adopted Annual Improvements to IFRSs 2015-2017 Cycle. The improvements have amended four standards with effective date of January 1, 2019: i) IFRS 3 - Business Combinations, in relation to obtaining control of a business which was previously accounted for as an interest in a joint operation; ii) IFRS 11 - Joint Arrangements, in relation to obtaining joint control of a business which was previously accounted for as a joint operation; iii) IAS 12 - Income Taxes, clarifying the treatment of taxes in relation to dividend payments; and iv) IAS 23 - Borrowing Costs, clarifying the treatment of borrowings which were previously capitalized when the related asset is ready for its intended use or sale. There was no effect from the adoption of these amendments.
2.2.2 Forthcoming requirements
Effective date | New standards or amendments |
January 1, 2020 | Definition of Materia (Amendment to IAS 1 and IAS 8) |
January 1, 2020 | Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) |
January 1, 2020 | Amendments to References to the Conceptual Framework in IFRS Standards |
January 1, 2021 | IFRS 17 "Insurance Contract" |
January 1, 2020 | Improve the definition of "business" (Amendment to IFR 3) |
January 1, 2022 | Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (Amendments to IAS 1) |
Available for optional adoption/ Effective date deferred indefinitely | Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) |
2.3 Summary of main accounting principles and policies
The main accounting principles and policies adopted in preparing these Consolidated Financial Statements are set our below. These policies have been applied consistently by the Group entities.
Basis of consolidation
Subsidiaries are all 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 over the entity. The Consolidated Financial Statements include the financial statements of the Company and the financial statements of those entities over which the Company has control, both directly or indirectly, from the date on which control is transferred to the Group until the date such control ceases.
The financial statements used in the consolidation process are those prepared by the individual Group entities in accordance with IFRS.
The consolidation procedures used are as follows:
· The assets and liabilities and income and expenses of subsidiaries are included on a line-by-line basis, allocating to non-controlling interests, where applicable, the share of equity and profit or loss for the year that is attributable to them. The resulting balances are presented separately in equity and the consolidated income statement; the acquisition method of accounting is used to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets;
· Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed an asset or liability is recognised in accordance with IFRS 9 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity;
· Goodwill represents the excess of the cost of an acquisition over the interest acquired in the net fair value at the acquisition date of the assets and liabilities of the entity or business acquired. Goodwill relating to investments accounted for using the equity method is included in the carrying amount of the investment. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair values of non-controlling interest over the net identifiable assets acquired and the liabilities assumed. If the consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss;
· Acquisition costs on business combinations are expensed as incurred;
· The purchase of equity holdings from non-controlling holders are accounted for as equity transactions that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration received and the relevant share of the carrying value of net assets of the subsidiary is recorded in equity;
· Unrealised gains and losses on transactions carried out between companies consolidated on a line-by-line basis and the respective tax effects are eliminated if material, as are corresponding balances for receivables and payables, income and expense, and finance income and expense.
Associates
Associates are investments in companies where the Group exercises a significant influence, which is presumed to exist when the Group holds voting rights between 20% and 50%. Associates are accounted for using the equity method.
The equity method is as follows:
· The Group's share of the profit or loss of an investee is recognised in the income statement from the date when significant influence begins up to the date when that significant influence ceases or when the investment is classified as held for sale. Investments in associates with negative shareholders' equity are impaired and a provision for its losses is accrued only if the Group has a legal or constructive obligation to cover such losses. Equity changes in investees accounted for using the equity method that do not result from profit or loss are recognised directly in consolidated equity reserves;
· The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value;
· if the ownership interest in an associate is reduced, but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit and loss;
· Unrealised gains and losses generated from transactions between the Company or its subsidiaries and its investees accounted for using the equity method are eliminated on consolidation for the portion pertaining to the Group; unrealised losses are eliminated unless they represent impairment.
Management fees received from associates are included within revenue. Appendix A includes a list of the entities included in the scope of consolidation.
Interests in joint operations
A joint operation is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control that is when the strategic financial and operating policy decisions relating to the activities of the joint operation require the unanimous consent of the parties sharing control.
Joint operation arrangements that involve the establishment of a separate entity in which each venture has an interest are referred to as jointly controlled entities. The Group recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses except when the entities are in the incorporation phase or have not started significant operations until the date of the consolidated financial statements. Investments classified as held for sale, are accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, where they are stated at the lower of their carrying amount or fair value less costs to sell.
The Group's share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the corresponding items in the consolidated financial statements on a line-by-line basis.
Where the Group transacts with its jointly controlled entities, unrealized profits and losses are eliminated to the extent of the Group's interest in the joint operation.
The following table provides a list of the jointly controlled entities, in which Beltone Financial Holding holds direct and indirect interests:
Interest percentage | ||
| Segment Country Direct and indirect interest in entity | |
Misr Beltone Asset Management Mutual f | unds management Egypt | 50% |
Foreign currency translation
Functional and presentation currency
Items included in the 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 functional currency of the Company is Egyptian pound. The Consolidated Financial Statements are presented in 'US Dollars' (US$), which is the Group's presentation currency.
Transactions and balances
Transactions in foreign currencies are translated into the functional currency of the relevant entity at the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated, at the reporting date, into the prevailing exchange rates at that date. Foreign currency exchange differences arising on the settlement of transactions and the translation of the statement of financial position are recognised in the income statement. Gains and losses on long-term financing provided to Group subsidiaries by the parent company, for which settlement is neither planned nor likely to occur, are initially recognised in other comprehensive income and reclassified to the income statement on disposal of the relevant entity.
Group companies
The financial statements of the Group entities are translated into the presentation currency as follows:
· Assets and liabilities are translated at the closing exchange rate;
· Income and expenses are translated at the average exchange rate for the year;
· All resulting exchange differences are recognised as a separate component of equity in the "translation reserve" until the group loses control of the relevant subsidiary. When the group disposes of a foreign operation the translation reserve, previously recognised in equity, is transferred to the income statement;
· Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rate; and
· In the preparation of the consolidated cash flow statement, the cash flows of foreign subsidiaries are translated at the average exchange rate for the year.
The exchange rates applied in relation to the US$ are as follows:
| Average for the year ended December 31, 2019 | Closing rate as of December 31, 2019 | Average for the year ended December 31, 2018 | Closing rate as of December 31, 2018 |
Egyptian Pound (EGP) | 0.0596 | 0.0625 | 0.056 | 0.056 |
Pakistan Rupee (PKR) | 0.0067 | 0.0065 | 0.0083 | 0.0072 |
Euro (EUR) | 1.1193 | 1.1210 | 1.1811 | 1.1469 |
DRRK Won (KPW) | 0.0092 | 0.0093 | 0.009 | 0.009 |
Property and equipment
Property and equipment are stated at purchase cost or production cost, net of accumulated depreciation and any impairment losses. Cost includes expenditure directly attributable to bringing the asset to the location and condition necessary for use and any dismantling and removal costs which may be incurred because of contractual obligations, which require the asset to be returned to its original state and condition.
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 are charged to the income statement during the financial period in which they are incurred. Each asset is treated separately if it has an autonomously determinable useful life and value. Depreciation is charged at rates calculated to write off the costs over their estimated useful lives on a straight-line basis from the date the asset is available and ready for use.
The useful lives of property and equipment and their residual values are reviewed and updated, where necessary, at least at each year-end. Land is not depreciated. When a depreciable asset is composed of identifiable separate components whose useful lives vary significantly from those of other components of the asset, depreciation is calculated for each component separately, applying the "component approach".
The useful lives estimated by the Group for the various categories of property and equipment are as follows.
Number of years | |
Land and buildings | |
Buildings | 50 |
Leasehold improvements and renovations | 3-8 |
Plant and machinery | 8-15 |
Cable system and equipment | 4-20 |
Commercial and other tangible assets | |
Tools | 5-10 |
Computer equipment | 3-5 |
Furniture and fixtures | 5-10 |
Vehicles | 3-6 |
Gains or losses arising from the sale or retirement of assets are determined as the difference between the net disposal proceeds and the net carrying amount of the asset sold or retired and are recognised in the income statement in the period incurred under "Disposal of non-current assets".
Leases
With the adoption of IFRS 16, the Group recognises a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use. Each lease payment is allocated between the principal liability and finance costs. Finance costs are charged to the income statement over the lease period using the effective interest rate method. The right-of-use asset is depreciated on a straight-line basis over the lease term.
Right-of-use assets are measured at cost comprising the following: (i) the amount of the initial measurement of lease liability; (ii) any lease payments made at or before the commencement date less any lease incentives received; (iii) any initial direct costs and, if applicable, (iv) restoration costs. Payments associated with short-term leases and leases of low-value assets are recognised as an expense in the income statement on a straight-line basis.
Lease liabilities are measured at the net present value of the following: (i) fixed lease payments, (ii) variable lease payment that are based on an index or a rate and, if applicable, (iii) amounts expected to be payable by the lessee under residual value guarantees, and (iv) the exercise price of a purchase option if the lessee is reasonably certain to exercise that option. Lease liabilities do not include any non-lease components that may be included in the related contracts.
Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Group's incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
The right-of-use asset is depreciated on a straight-line basis over the entire term of the contract, unless the contract provides for the transfer of ownership at the end of the lease term or the cost of the lease reflects the fact that the lessee will exercise the purchase option. In this case, the depreciation must be the shorter of the useful life of the asset and the duration of the contract. The estimated useful lives for right-of-use assets are calculated according to the same criterion applied to owned tangible assets. In addition, the right-of-use asset is decreased by any impairment losses and adjusted to reflect any remeasurement of the associated lease liability.
In the statement of financial position, the Group presents right-of-use assets within tangible assets and lease liabilities within current and non-current borrowings.
In the income statement, interest expense on lease liabilities constitutes a component of financial expenses and is shown separately from the depreciation of right-of-use assets.
The Group recognizes deferred taxation on right-of-use assets and on lease liabilities in relation to contracts for which IFRS 16 is applied for the first time. Management has assessed the existing tax legislation and interpreted the accounting principles applied, concluding the recognition of deferred tax is appropriate.
Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in profit or loss when the asset is derecognised.
LicensesCosts for the purchase of telecommunication licenses are capitalised. Amortisation is charged on a straight-line basis such as to write off the cost incurred for the acquisition of a right over the shorter of the period of its expected use and the term of the underlying agreement, starting from the date on which the acquired license may be exercised.
Software
Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Software licenses are amortised on a straight-line basis over their useful life (between 3 to 8 years), while software maintenance costs are expensed in the income statement in the period in which they are incurred.
Costs incurred on development of software products are recognised as intangible assets when the Group has intentions to complete and use or sell the assets arising from the project, considering the existence of a market for the asset, its commercial and technological feasibility, its costs can be measured reliably and there are adequate financial resources to complete the development of the asset. Other development expenditures are recognised in the income statement in the period in which they are incurred.
Directly attributable costs that are capitalised as part of a software product include software development employee costs and an appropriate portion of relevant overheads. 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.
Number of years | |
Rights of use |
17- 20 |
Trademarks | 20 |
Contractual agreements with customers | 20 |
Computer software | 5 |
Impairment of non-financial assets
Assets that have an indefinite useful life - for example, goodwill or intangible assets not ready to use - are not subject to amortisation and are tested annually for impairment. Assets that are subject to 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. In determining an asset's value in use the estimated future cash flows are discounted using a pre-tax rate that reflects the market's current assessment of the cost of money for the investment period and the specific risk profile of the asset. 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, "CGU"). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the 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 goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Investment PropertyInvestment properties are property (land or a building or part of a building or both) held by the Group to earn rental income or for capital appreciation or both, rather than for sale in the ordinary course of business or for use in supply of goods or services or for administrative purposes. Investment properties are initially measured at cost. The cost of a purchased investment property comprises its purchase price and any directly attributable expenditure.
Directly attributable expenditure includes, for example, professional fees for legal services, property transfer taxes and other transaction costs. Subsequent to initial recognition, the Group has elected to measure investment properties at cost less accumulated depreciation and accumulated impairment losses, if any. Investment property is derecognised upon disposal, when it is permanently withdrawn from use and no future economic benefits expected from its disposal. Gains or losses arising from the retirement or disposal of investment property are determined as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss in the period of the retirement or disposal. Reclassifications to / from investment property are made when, and only when, there is a change of use.
Revenue from operating lease rentals is recognised on a straight-line basis over the relevant term of the lease. The rental income generated by investment properties is recognised within revenue in the consolidated income statement.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each component of the investment properties. The estimated useful lives of leased units are estimated at 50 years.
Trade receivables, current assets and current financial assets and other receivables are originated in the ordinary course of business and held within a business model with the objective to hold the receivables in order to collect contractual cash flows that meet the 'solely payments of principal and interest' criterion under IFRS 9. Consequently, they are initially recognised at fair value adjusted by directly attributable transaction costs and subsequently recognised at amortised cost on the basis of the effective interest rate method (namely the interest rate that, at the time of initial recognition, renders the present value of future cash flows and the carrying amount equal), appropriately adjusted to take any write-downs into account, through the recognition of a provision for doubtful accounts. Receivables due from customers and other financial receivables are included in current assets. Should be the expiry date over twelve months from the reporting date, they are classified as non-current assets. Receivables with maturities greater than twelve months and no significant financing component are discounted to present value.
Equity investments for which there is no quoted market price in an active market and there is insufficient financial information in order to determine fair value may be measured at cost as an estimate of fair value, as permitted by IFRS 9. The Group may irrevocably elect to present subsequent changes in the investment's fair value in other comprehensive income ("OCI") upon the initial recognition of an equity investment that is not held to sell. This election is made on an investment-by-investment basis. Generally, any dividends from these investments are recognised in other income from investments within Result from investments when the Group's right to receive payment is established. Other net gains and losses are recognised in OCI and will not be reclassified to the Consolidated Income Statement in subsequent periods. Impairment losses (and the reversal of impairment losses) on equity investments measured at fair value through OCI are not reported separately from other changes in fair value in OCI.
Investments are held for collection of contractual cash flows and for selling the financial assets, where the assets' cash flows represent solely payments of principal and interest, are measured at fair value through OCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method.
The Group measures equity investments at fair value. When there is no quoted market price in an active market and there is insufficient financial information in order to determine fair value may be measured at cost as an estimate of fair value. Where the Group's management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group's right to receive payments is established.
Assets that do not meet the criteria for amortised cost or fair value through OCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.
Impairment of financial assets
At the end of each reporting period, all financial assets, other than those measured at fair value with a balancing entry in the income statement, are analysed to assess whether there is objective evidence that financial assets may be impaired. Under IFRS 9, a forward-looking expected credit loss model must be applied when assessing impairment. In making impairment assessments, the Group applies the standard simplified approach to estimate the lifetime expected credit losses and considers its historical credit loss experience, adjusted for forward-looking factors specific to the nature of the Group's receivables and economic environment. If any such evidence exists, an impairment loss is recognised within financial expenses.
Trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments for a significant period of time. For financial assets recognised at amortised cost, when an impairment loss has been identified, the value of the impairment loss is measured as the difference between the carrying amount of the asset and the present value of expected future cash flows, discounted on the basis of the original effective interest rate. This amount is recognised in the income statement.
Financial liabilities
Financial liabilities consisting of borrowings, trade payables and other obligations are recognised when the Group becomes a party to the related contractual clauses and are initially recognised at fair value, adjusted by any directly attributable transaction costs.
Financial liabilities and trade payables, with the exception of derivative financial instruments, are measured at amortised cost using the effective interest rate method.
Derivative financial instruments and embedded derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Fair value gains and losses on all of the Groups derivative financial instruments are recognised in the income statement within finance income and expense.
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through profit or loss.
Derecognition of financial assets and liabilitiesFinancial assets are derecognised when one of the following conditions is met:
· the contractual right to receive the cash flows from the asset has expired;
· the Group has substantially transferred all of the risks and rewards related to the asset, transferring its rights to receive the cash flows from the asset or assuming a contractual obligation to pass the cash flows received to one or more beneficiaries by virtue of an agreement that meets the requirements set out in IFRS 9 (pass through test);
· the Group has not transferred nor substantially maintained all of the risks and rewards related to the financial asset, but has transferred control.
The financial liabilities are derecognised when they are extinguished, namely when the contractual obligation has been met, cancelled or prescribed. An exchange of debt instruments with substantially different contractual terms, must be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial variation of the contractual terms of an existing financial liability must be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
Offsetting financial assets and liabilitiesThe Group offsets financial assets and liabilities if and only if:
· there is a legally exercisable right to offset the amounts recognised in the financial statements;
· there is an intention either to offset or to dispose of the asset and settle the liability at the same time.
Interest incomeInterest income is recognised using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash-flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.
Inventories
Inventories are stated at the lower of purchase cost or production cost and net realisable value. Cost is based on the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. When necessary, obsolescence allowances are made for slow-moving and obsolete inventories.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. In the consolidated statement of financial position, bank overdrafts are shown within borrowings in current liabilities.
The tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity. In this case, the tax is also recognised in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the countries where the Group's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However, deferred income tax is not accounted for if it arises from initial recognition of goodwill or the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted at the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the near future.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Business CombinationThe acquisition method of accounting is used to account for all business combination, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
· Fair values of the assets transferred;
· Liabilities incurred to the former owners of the acquired business;
· Equity interests issued by the group;
· Fair value of any asset or liability resulting from a contingent consideration arrangement and;
· Fair value of any pre-existing equity interest in the subsidiary;
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred. The excess of the:
· Consideration transferred;
· Amount of any non-controlling interest in the acquired entity, and
· Acquisition date fair value of any previous equity interest in the acquired entity
Over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly on profit or loss as a bargain purchase.
Where the settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquire is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.
In case that initial treatment of business combination is not complete at the end of financial period consolidated, the group recognises temporary amounts for accounts and during the measurement period not to exceed one year from the date of acquisition. The adjustment is performed retrospectively for completion of new information (Intangible assets, deferred taxes/provisions and others).
Provisions
Provisions are only recognised when the Group has a present legal or constructive obligation arising from past events that will probably result in a future outflow of resources, and the amount has been reliably estimated. Provisions are not recognised for future operating losses. The amount provided represents the best estimate of the present value of the outlay required to meet the obligation. The interest rate used in determining the present value of the liability reflects current market rates and takes into account the specific risk of each liability.
Revenue recognition
Revenue is recognised when the control over a product or service is transferred to a customer. Revenue is measured at the transaction price, which is based on the amount of consideration that the Group expects to receive in exchange for transferring the promised goods or services to the customer and excludes any sales incentives as well as taxes collected from customers that are remitted to government authorities. The transaction price will include estimates of variable consideration to the extent it is probable that a significant reversal of revenue recognised will not occur.
Where a contract includes multiple performance obligations, the transaction price will be allocated to each performance obligation based on the stand-alone selling prices. Management has exercised judgment in determining performance obligations, variable consideration, allocation of transaction price and the timing of revenue recognition.
The Group does not recognise any assets associated with the incremental costs of obtaining a contract with a customer that are expected to be not recovered. The majority of revenue is recognised at a point-in-time or over a period of one year or less, and the Group applies the practical expedient to recognise the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that would otherwise be recognised is one year or less.
Specifically, the Group mainly recognises revenue from financial services, cables and mobile traffic. The criteria followed by the Group in recognising ordinary revenue are as follows:
Revenue of the financial services
Revenue of the financial services mainly refer to Investment banking and management fees. When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognised over time by reference to the stage of completion of the transaction at the end of the reporting period. Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.
More specifically, investment banking revenue refers to security and investment banking fees recognised when complete the implementation of the service.
Management fees of funds and portfolios are recognised as revenue, as the services are rendered, in accordance with the contractual terms of each fund and portfolio.
Incentive fees are recognised as revenue based on predetermined percentages agreed with clients, calculated by reference to the annual return on each fund or portfolio, but only to the extent that the amount of revenue can be measured reliably and it is probable that economic benefits will flow to the Group.
Sale commissions represent commissions on sale of securities for clients in local or global stock exchanges, calculated at point in time on the basis of specified rates agreed with clients as a percentage of the sale transaction. Purchase commissions represent commissions on purchase of securities for clients in local or global stock exchanges, calculated at point in time on the basis of specified rates agreed with clients as a percentage of the purchase transaction.
Custodian fees are recognised as the difference between fees collected from clients and those incurred or paid to custodians. They are recognised i) over time according to contracts signed with clients; ii) at point in time as commissions for collecting coupons for customers (the collection of these coupons are on behalf of the customers).
ORASCOM INVESTMENT HOLDING S.A.E.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,2019
Revenue from cable segment
Revenue from bandwidth capacity sales is recognised over time on the basis of usage of bandwidth by the customers. Advances received from customers, for which the service has not yet been provided is disclosed as deferred income. Otherwise the transaction price is adjusted for the effects of a significant financing component included in advance payments such as IRU contracts.
Revenue from mobile traffic
Revenue arising from post-paid traffic, interconnection and roaming is recognised over time on the basis of the actual usage made by each subscriber and telephone operator. Such revenue includes amounts paid for access to and usage of the group network by customers and other domestic and international telephone operators. Revenue from the sale of prepaid cards and recharging is recognised over time on the basis of the prepaid traffic actually used by subscribers during the period. The unused portion of traffic at period end is recognised deferred income. Revenue from mobile (prepaid or subscription) activation and/or substitution, prepaid recharge fees and the activation of new services and tariff plans is recognised at a point in time for the full amount at the moment of activation independently of the period in which the actual services are rendered by the Group.
Revenue from rental
Rental income from the investment property owned by the Company is recognised over time based on the maturity lease agreements
Earnings per share
Basic: Basic earnings per share are calculated by dividing the profit for the year attributable to equity holders of the Company, both from continuing and discontinued operations, by the weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the Company and held as treasury shares.
Diluted: Diluted earnings per share are calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of ordinary shares of the Company outstanding during the year where, compared to basic earnings per share, the weighted average number of shares outstanding is modified to include the conversion of all dilutive potential shares, while the profit for the year is modified to include the effects of such conversion net of taxation. Diluted earnings per share are not calculated when there are losses as any dilutive effect would improve earnings per share.
Segment reportingOperating segments are reported in a manner which is consistent with the internal reporting information provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors of the Company.
Non-current assets and liabilities held for sale
Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets (or components of a disposal group) are re-measured in accordance with the Group's accounting policies. Thereafter the assets and liabilities held for sale (or disposal group) are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group is first allocated to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets and deferred tax assets, which continue to be measured in accordance with the Group's accounting policies. Impairment losses on initial classification as held for sale and subsequent losses on re- measurement are recognised in the income statement. Subsequent increase in fair value less costs to sell may be recognised in the income statement only to the extent of the cumulative impairment loss that has been recognised previously.
Discontinued operationsA discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is re-presented as if the operation had been discontinued from the start of the comparative period.
3. Use of estimates and critical judgements
The preparation of the Consolidated Financial Statements requires that the directors apply accounting policies and methodologies that, in some circumstances, are based upon complex and subjective judgments and estimates that are based on historical experience and assumptions that are considered reasonable and realistic at the time, considering the relevant circumstances. The application of such estimates and assumptions affects the amounts recorded in the consolidated statement of financial position, the consolidated income statement, the consolidated statement of comprehensive income and cash flows, as well as in the notes. Actual results might differ from such estimates due to the uncertainty surrounding the assumptions and conditions upon which estimates are based. The accounting estimates that require the more subjective judgment of management in making assumptions or estimates regarding the effects of matters that are inherently uncertain and for which changes in conditions may significantly affect the results reported in these Consolidated Financial Statements are summarised below.
Valuation of financial instruments
For some financial instruments that are not traded in an active market and included in the financial statements such as financial derivatives, Management estimates fair value using valuation techniques based on inputs and assumptions, some of which are linked to quoted market prices and others on management's estimations. Management applied reasonable option valuation models during the period in estimating the fair value of these financial instruments. Management also conducted a sensitivity analysis for changes in the estimated fair value of these instruments and changes in inputs used for assessing the reasonableness of results reached using the acceptable valuation models.
Impairment of non-current assets
Non-current assets are reviewed to determine whether there are any indications that the net carrying amount of these assets may not be recoverable and that they have suffered an impairment loss that needs to be recognised. In order to determine whether any such elements exist, it is necessary to make subjective measurements, based on information obtained within the Group, in the market and on past experience. When indicators are identified that an asset may have become impaired, the Group estimates the impairment loss using suitable valuation techniques. The identification of elements indicating that a potential impairment exists and estimates of the amount of the impairment, depend on factors that may vary in time, affecting management's assessments and estimates.
Impairment of financial assets
At the end of each reporting period, the Group reviews the carrying amounts of its financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). The Group assesses whether there is an objective evidence that, as a result of one or more events (a "loss event") that occurred after the initial recognition of a financial asset or a group of financial assets, the estimated future cash flows of an asset or a group of assets have been affected.
The Group monitors impairment losses recognised, and where an impairment loss subsequently reverses, the carrying amount of a financial asset or a group of financial assets is increased to the revised estimate of its recoverable amount, but the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset.
Intangibles
Intangible assets constitute a significant part of the Group's total assets and the scheduled amortisation charges from a significant part of the annual operation expenses. The useful economic lives arrived at, on the basis of management's estimates and assumptions, have a major impact on the valuation of intangible assets.
At the end of each reporting period, the Group reviews the carrying amounts of its intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If such indication exists, the recoverable amount of the intangible asset is estimated, in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, intangible assets are allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Depreciation of non-current assets
The cost of property and equipment is depreciated on a straight-line basis throughout the useful economic life of the relevant asset. The useful economic life is determined by management at the time the asset is acquired and is based upon historical experience for similar assets, market conditions, and forecasts regarding future events that could have an impact on useful life, including changes in technology. Therefore, the actual useful economic life may differ from the estimated useful life. The Group periodically evaluates sector and technology changes in order to update the remaining useful life. Such periodic updates could result in a change during the depreciation period, and therefore also in the depreciation in future periods.
ORASCOM INVESTMENT HOLDING S.A.E.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,2019
Taxes
Income taxes (both current income tax and deferred taxes) are determined in each country where the Group operates in accordance with a prudent interpretation of the applicable tax regulations.
This process results in complex estimates in determining taxable and deductible income and taxable temporary differences between accounting and tax values. In particular, deferred tax assets are recognised when it is probable that there will be future taxable income against which the temporary differences can be utilised. The assessment of the recoverability of deferred tax assets, in relation to tax losses that can be used in future periods and deductible temporary differences, considers the estimated future taxable income on the basis of a prudent tax planning.
Goodwill
The impairment test on goodwill is carried out by comparing the carrying amount of cash-generating units and their recoverable amount. The recoverable amount of a cash-generating unit is the higher of fair value, less costs to sell, and its value in use. This complex valuation process entails the use of methods such as the discounted cash flow method which uses assumptions to estimate cash flows. The recoverable amount depends significantly on the discount rate used in the discounted cash flow model as well as the expected future cash flows and the growth rate used for the extrapolation.
Provisions and contingent liabilities
Management assess events and circumstances indicating that the Group may have an obligation resulting in the ordinary course of business, Management applies its judgment in determining whether the recognition criteria have been meet through assessing the probability of the obligation, making assumptions about timing and amounts of future cash outflows expected to settle the obligation.
4. Financial risk management
Financial risk factorsThe Group is exposed to a variety of financial risks: market risk (including foreign exchange risk and cash flow and fair value interest rate risk), credit risk and liquidity risk. In particular, the Group is exposed to risks from movements in exchange rates, interest rates and market prices. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's performance through ongoing operational and finance activities. The management has overall responsibility for the establishment and oversight of the Group's risk management framework.
Market Riski) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising when its business transactions are in currencies other than its functional currency. The main currencies to which the Group is exposed are the US dollar ("US$"), the Pakistani Rupee ("PKR"), the Euro ("EUR"), DPRK Won ("KPW") and the Egyptian Pound ("EGP").
The Group is exposed to foreign currency risk arising in two separate ways:
a) Foreign exchange operations risk
The Group entities predominantly execute their operating activities in their respective functional currencies. Some Group subsidiaries are, however, exposed to foreign currency risks in connection with scheduled payments in currencies that are not their functional currencies. In general, this relates to foreign currency denominated supplier payables due to capital expenditures and receivables. The Group monitors the exposure to foreign currency risk arising from operating activities and in general does not use derivative financial instruments to hedge foreign exchange exposure in relation to ordinary operating activities.
At year end, major net assets / (net liabilities) foreign currencies positions presented in 'US Dollars' (US$), were as follows:
(In thousand $US) | 2019 | 2018 |
USD | 20,107 | 93,903 |
Euro | 13,236 | (5,414) |
PKR | (26,924) | (15,920) |
GBP | 47 | 468 |
Other | 11,814 | 11,386 |
The increase in other net assets as of December 31, 2019 refer to positions in Brazilian Reals.
b) As of December 31, 2019, if the functional currencies had increased/(decreased) by 10% against the US$, Euro, Egyptian pound, and DPRK Won, with all other variables held constant, the translation of foreign currency on cash and cash equivalent would have resulted in an increase/(decrease) of US$ 4,768 thousand of net profit (2018: US$ 7,506 thousand of net profit).
Foreign exchange translation risk
Due to its international presence, the Group's Consolidated Financial Statements are exposed to foreign exchange fluctuations, as these affect the translation of subsidiaries' assets and liabilities denominated in foreign currencies to the US$ (the Group's presentational currency). The currencies concerned are mainly the Egyptian pound, the Pakistani Rupee, DPRK Won and the Euro. This represents a translational risk rather than a financial risk given that these movements are posted directly to equity in the cumulative translation reserve.
ii) Price risk
The Group has limited exposure to equity instruments of other entities that are publicly traded.
iii) Cash flow and fair value interest rate risk
The Groups interest rate risk arises from borrowings. Borrowings received at variable interest rates expose the Group to cash flow interest rate risk. The Group has not entered into any derivative financial instruments to hedge its exposure to cash flow interest rate risk.
All borrowings outstanding as of December 31, 2019 (US$ 71,492 thousand) and December 31, 2018 (US$ 170,125 thousand) are at a fixed interest rate, at a variable interest rate and interest rate free.
The Group analyses its interest rate exposure on a dynamic basis. The Group calculates the impact on profit or loss of a defined interest rate shift. The same interest rate shift is used for all currencies.
The impact of a 1% interest rate shift would be a maximum increase/decrease in 2019 finance costs of US$ 370 thousand (2018: US$ 520 thousand).
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
· The fair value of a financial instrument traded in active markets is based on quoted market prices at the reporting date. A market is regarded as active, if quoted prices are readily and regularly available from an exchange, dealer, broker, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. These instruments are included in level1.
· The fair value of instruments that are not traded in an active market (for example privately negotiated derivatives between two parties) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, instrument is included in Level2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level3.
The following table sets forth the Group's financial assets and liabilities that are measured at fair value as of December 31, 2019 and December 31, 2018.
(in thousands of US$) | December 31, 2019 | December 31, 2018 |
Assets |
|
|
Financial assets at fair value through OCI | 3,361 | 3,493 |
Financial assets at fair value through profit or loss | 34 | 2,053 |
Total assets | 3,395 | 5,546 |
The Group measured financial assets as level 1 fair value through OCI for a total amount of US$ 2,547 thousands (2018: USD$ 2,672 thousands) and US$ 814 thousands (2018: USD$ 821 thousands) using level 3 inputs. Level 2 inputs were used to determine the fair value of the financial assets through profit or loss for a total amount of US$ 34 thousand (2018: US$ 2,053 thousand). For further details, refer to Note (17) 'Other financial assets'.
The carrying amount of short-term trade and other receivables and payables reasonably approximates fair value as of December 31, 2019 and December 31, 2018.
Credit RiskThe Group considers that it is not exposed to major concentrations of credit risk in relation to trade receivables. However, credit risk can arise in the event of non-performance of a counterparty, particularly in relation to credit exposures for trade and other receivables, financial instruments and cash and cash equivalents.
The credit risk to which the Group is exposed to be analysed by segment as follows:
i) Financial Services
In general, all costumers are relating to the financial services of Beltone financial group as follows: financial segment of Investment Banking, Asset Management, Brokerage and Other financial Services.
ii) Cable
In general, cable customers are offered maximum payment terms of 30 days. Customers are checked for credit worthiness before offering credit terms.
iii) GSM
Substantially all customers in Lebanon are prepaid customers meaning that there is a low credit risk associated with this GSM operation.
iv) Investment property:
Substantially there is only one significant international client.
v) Other
Customers' credit worthiness is reviewed before credit terms are offered. Accounts receivable are monitored and outstanding balances are followed up until the balance is received.
The Group tries to mitigate credit risk by adopting specific control procedures, including assessing the credit worthiness of the counterparty and limiting the exposure to any one counterparty. Accruals to the allowance of doubtful receivables amounted to US$ 35,939 thousand during 2019 (US$ 29,590 thousand for the year ended December 31, 2018). See also Note (19).
Credit risk relating to cash and cash equivalents and financial deposits arises from the risk that the counterparty becomes insolvent and accordingly is unable to return the deposited funds or execute the obligations under the derivative transactions as a result of the insolvency.
In general, the receivables and financial receivables included in financial assets relate to a variety of small amounts due from a wide range of counterparties, therefore, the Group does not consider that it has a significant concentration of credit risk.
Liquidity RiskThe Group monitors and mitigates liquidity risk arising from the uncertainty of cash inflows and outflows by maintaining sufficient liquidity of cash balances. In general, liquidity risk is monitored at entity level whereby each subsidiary is responsible for managing and monitoring its cash flows and rolling liquidity reserve forecast in order to ensure that it has sufficient committed facilities to meet its liquidity needs.
Laws and regulations in certain countries, such as North Korea, in which the Group operates limit the conversion of current cash balances into foreign currency. Given the nature of the business, Group companies may have to make payments in foreign currencies (for example capital expenditures), the lack of individual entity foreign currency reserves means that these companies are largely dependent on the Company to make these payments on its behalf. The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the tables are the gross contractual, undiscounted cash flows including interest, charges and other fees.
(in thousands of US$) | Carrying amount | Expected cash flows (*) | Less than 1 year | Between 1 and 5 years | More than 5 years |
Liabilities | |||||
Liabilities to banks | 63,853 | 71,143 | 33,124 | 37,703 | 316 |
Trade payables | 37,132 | 37,132 | 37,132 | - | - |
Finance lease liability | 5,713 | 5,713 | 745 | 3,887 | 1,081 |
Other borrowings | 1,926 | 2,026 | 1,113 | 913 | - |
As Of December 31, 2019 | 108,624 | 116,014 | 72,114 | 42,503 | 1,397 |
(in thousands of US$) | Carrying amount | Expected cash flows (*) | Less than 1 year | Between 1 and 5 years | More than 5 years |
Liabilities | |||||
Liabilities to banks | 156,343 | 164,637 | 105,001 | 55,346 | 4,290 |
Trade payables | 59,891 | 59,891 | 59,891 | - | - |
Finance lease liability | 11,038 | 11,038 | 369 | 7,764 | 2,905 |
Other borrowings | 2,744 | 2,941 | 1,725 | 1,216 | - |
As Of December31, 2018 | 230,016 | 238,507 | 166,986 | 64,326 | 7,195 |
* Expected cash flows are the gross contractual undiscounted cash flows including interest, charges and other fees.
Capital risk managementThe Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital.
Governmental authorisations
Certain future Group activities, including the GSM operations in Lebanon or the cable segment, are dependent on obtaining appropriate government authorisations. Should these authorisations not be obtained or delayed, there could be an adverse impact on the future operations of the Group, such as a decrease in revenues or penalty payments due to contractual counterparties.
Political and economic risk in emerging countries
A significant amount of the Group's operations is conducted in Egypt, North Korea and Pakistan. The operations of the Group depend on the market economy of the countries in which the subsidiaries or associate operate. In particular, these markets are characterised by economies that are in various stages of development or are undergoing restructuring. Therefore, the operating results of the Group are affected by the current and future economic and political developments in these countries. In particular, the results of operations could be unfavourably affected by changes in the political or governmental structures or weaknesses in the local economies in the countries where it operates. These changes could also have an unfavourable impact on financial condition, performance and business prospects.
Regulatory risk in emerging countries
Due to the nature of the legal and tax jurisdictions in the emerging countries where the Group operates, it is possible that laws and regulations could be amended. This could include factors such as the current tendency to withhold tax on the dividends of these subsidiaries, receiving excessive tax assessments, granting of relief to certain operations and practices relating to foreign currency exchange. These factors could have an unfavourable effect on the financial activities of the Group and on the ability to receive funds from the subsidiaries.
Revenue generated by the majority of the Group subsidiaries is expressed in local currency. The Group expects to receive most of this revenue from its subsidiaries and therefore it relies on their ability to be able to transfer funds. The regulations in the various countries, such as North Korea, where Koryolink operates could reduce the ability to pay interest and dividends and to repay loans, credit instruments and securities expressed in foreign currency through the transfer of currency. In addition, in some countries it could be difficult to convert large amounts of foreign currency due to central bank regulations. The central banks may amend regulations in the future and therefore the ability of the Company to receive funds from its subsidiaries may change.
Government ApprovalsSome of the activities of the Group, including the telecommunications activity in Lebanon and the marine cable business, depend heavily on obtaining the approval of the concerned government authorities. The telecommunications activity in Lebanon is in accordance with the agreement with the Ministry of Telecommunications for the management of Mobile Interim Company One (MIC1) which expired in January 31, 2013 and are regularly updated.
In the event that such approvals cannot be obtained, this could have a negative effect on the Group's future activities, such as lower revenues or fines by contracting parties.
The tables below present the Groups financial assets and liabilities by category.
Assets per statement of financial position |
| ||||
Cash and cash equivalents | 63,438 | - | 63,438 | 106,565 | - 106,565 |
Trade receivables | 54,779 | - | 54,779 | 31,642 | - 31,642 |
Other financial assets | 18,960 | 3,361 | 22,321 | 115,719 | 3,493 119,212 |
Other current assets1 Total |
|
|
|
|
|
¹ It only includes other non-trade receivables as is the sole to meet the definition of a financial assets.
As of December 31, 2019 As of December 31, 2018
(in thousands of US$)
Borrowings
Other non-current liabilities 2
Trade payable and other current liabilities2
Total
2 Excludes other payable due to local authorities and Prepaid traffic and deferred income, as these do not meet the definition of a financial liability.
5. Segment reporting
The chief operating decision-maker has been identified as the board of directors of the Company. The board of directors reviews the Group's internal reporting in order to assess its performance and allocate resources, mainly from a geographical perspective, of the mobile telecommunication business.
Pursuant to the decision to dispose of entities previously included in the Media and Technology segment, OIH management has changed its internal reporting as analysed by the chief operating decision-maker and revised the reportable operating segments as follows:
· Financial Service: relating to the financial services of Beltone financial group represented in the group of different financial segment of Investment Banking, Asset Management, Brokerage and Other financial Services.
· Investment property: investment properties relate to real estate property the Group owns in Sao Paolo, Brazil
· GSM - Lebanon: relating to the management contract of the Lebanese mobile telecommunications operator Alfa, which is owned by the Republic of Lebanon.
· Cable: relating to the provision of direct broadband and high-speed connectivity to telecom operators, internet service providers and major corporations through submarine fibre optic cables.
· Other: includes Media & Technology (relating mainly to the provision of online advertising and content to corporate customer, mobile value added services and software development and hosting of corporate clients) and the Group's equity investments and income and expenses related to OIH.
· The Group reports on operating segments, which are independently managed. The chief operating decision- maker assesses the performance of such operating segments based on:
· Total revenue;
· EBITDA, defined as profit for the period before income tax expense /(benefit), impairment of associate, share of profit/(loss) of investment in associates, foreign exchange gains /(loss), financial expense, financial income, disposal of non-current assets, impairment charges and depreciation and amortisation; and
· Segment capital expenditure is the total cost incurred during the period to acquire property and equipment and intangible assets other than goodwill.
The following information is regularly provided to the chief operating decision maker and is measured consistently with that of the financial statements.
(in thousands of US$)
Cable |
| ||||
Financial Services GSM Lebanon Investment Property Other |
|
|
|
|
|
Total | 70,875 (1,161) 69,714 7,666 | 75,894 | (1,235) | 74,659 | 20,089 |
Reconciliation of EBITDA to profit before income tax
(in thousands of US$) | For the Period ended December 31, 2019 | For the Period ended December 31, 2018 |
EBITDA | 7,666 | 20,089 |
Depreciation and amortization | (7,539) | (7,564) |
Impairment charges | (8,203) | (1,020) |
Disposal of non-current assets | 58 | (187) |
Financial income | 843 | 3,450 |
Financial expense | (14,005) | (9,767) |
Foreign exchange (loss) | (4,655) | (1,816) |
Share of profit of equity investments | 170,526 | 159,093 |
Impairment of associate | (165,511) | (159,093) |
(Loss)/ Profit before income tax | (20,820) | 3,185 |
Assets per segment
The following table illustrates assets for each reportable segment as they are regularly provided to the board of directors.
As Of December 31, 2019 As Of December 31,2018
(in thousands of Property Intangible US$) and assets Investment i equipment Property | Equity nvestments |
Total | Property and equipment | Intangible Investment Equity Total assets Property investments | ||||||
Cable | 61,075 | 1,636 | - | - | 62,711 | 62,196 | 1,422 | - | - | 63,618 |
Investment Property | - | - | 60,747 | - | 60,747 | - | - | 64,290 | - | 64,290 |
Financial Services | 9,086 | 22,874 | - | - | 31,960 | 14,047 | 32,462 | - | - | 46,509 |
Other | 3,118 | - | - | 143,078 | 146,196 | 4,698 | (33) | - | 123,439 | 128,104 |
Total 73,279 24,510 60,747 143,078 301,614 80,941 33,851 64,290 123,439 302,521
Reconciliation of assets allocated to total assets
(in thousands of US$) | As Of December 31,2019 | As Of December 31,2018 |
Assets allocated | 301,614 | 302,521 |
Other non-current financial assets | 17,381 | 14,086 |
Other non-current assets | 16,574 | 13,224 |
Inventories | 506 | 413 |
Trade receivables | 54,779 | 53,269 |
Other current financial assets | 4,940 | 105,126 |
Other current assets | 13,461 | 11,114 |
Assets held for sale | 13,850 | - |
Cash and cash equivalents | 63,438 | 106,565 |
Total assets | 486,543 | 606,318 |
Capital expenditure
The table below illustrates the capital expenditure incurred by each segment for the year ended December 31,2019 and the year ended December 31,2018:
6. Revenue
(in thousands of US$) | For the Period ended December 31,2019 | For the Period ended December 31,2018 |
Interconnection traffic | 44,584 | 45,046 |
Revenue form Financial services | 14,151 | 18,730 |
Management contract -Fees | 7,162 | 7,200 |
Investment Property Revenue | 3,652 | 3,683 |
Other revenues | 165 | - |
Total | 69,714 | 74,659 |
Disaggregation of revenue from contracts with customers
Primary geographical markets
Brazil Pakistan Lebanon Egypt
Major service Lines Rental revenues Management Fees - Funds Performance Fees - Funds
Other Financial management
Success Fees Retainer Fees Brokerage Revenues Cable rental
GSM Management Agreement Others
Timing of revenue recognition
Products transferred at point of
Services transferred over period of time
7. Purchases and services
| For the Period ended December 31,2019 | For the Period ended December 31,2018 |
Rental of local network, technical sites and other leases | 6,703 | 6,917 |
Customer acquisition costs | 304 | 384 |
Purchases of goods and changes in inventories | 1,706 | 881 |
Band width cost | 4,069 | 4,086 |
Maintenance costs | 2,419 | 2,323 |
Utilities | 841 | 1,099 |
Brokerage Commissions | 120 | 43 |
Advertising and promotional services | 1,012 | 1,483 |
Consulting and professional services | 5,664 | 10,557 |
Bank and post office charges | 512 | 782 |
Insurance | 125 | 161 |
Airfare | 260 | 214 |
Accommodation, Meals and Per diem | 384 | 440 |
IT Supplies and expense | 196 | 237 |
Sites expense | 241 | 122 |
Security Guards | 205 | 210 |
Other service expenses | 1,081 | 447 |
Total | 25,842 | 30,386 |
The group has elected not to recognise right of use assets and lease liabilities for short term lease and low value assets to be recognise as an expense on straight line basis over the lease term which amounted to US$ 121 thousands in 2019 (2018 US$ 47 thousands)..
8. Other expenses
(in thousands of US$) | For the Period ended December 31,2019 | For the Period ended December 31,2018 |
Provisions for risks | 5,863 | 8,839 |
Accruals for provisions, write downs and penalties | 4,881 | 611 |
Promotion and gifts | 49 | 33 |
Other operating expenses | 1,548 | 4,644 |
Total | 12,341 | 14,127 |
9. Personnel costs
(in thousands of US$) | For the Period ended December 31,2019 | For the Period ended December 31,2018 |
Wages and salaries | 20,831 | 19,290 |
Contractual bonuses | 1,611 | 748 |
Other benefits | 759 | 746 |
Pension costs | 532 | 764 |
Social security | 373 | 424 |
Subscription & Membership Dues | 204 | 331 |
Other personnel costs | 288 | 244 |
Total | 24,598 | 22,547 |
10. Depreciation and Amortisation
(in thousands of US$) | For the Period ended December 31, 2019 | For the Period ended December 31,2018 |
Depreciation of tangible assets |
|
|
Land and Buildings | 270 | 168 |
Cable system and equipment | 2,747 | 3,185 |
Commercial and other tangible assets | 2,373 | 1,369 |
Right of Use (IFRS 16) | 349 | 1,049 |
Depreciation of Investment property |
|
|
Buildings | 1,327 | 1,429 |
Amortization of intangible assets |
|
|
License | 64 | 164 |
Right of use | 102 | 24 |
Other | 307 | 176 |
Total | 7,539 | 7,564 |
11. Net financing (costs)
(in thousands of US$) | For the Period ended December 31, 2019 | For the Period ended December 31,2018 |
Interest income on deposits | 843 | 3,450 |
Financial income | 843 | 3,450 |
Interest expense on borrowings | (10,161) | (7,858) |
Interest expense on trade and other liabilities | - | (3) |
Interest on lease liabilities | (565) | - |
Other interest expense and financial charges | (3,279) | (1,730) |
Impairment of financial assets | - | (176) |
Financial expense | (14,005) | (9,767) |
Foreign exchange (loss) | (4,655) | (1,816) |
Foreign exchange (loss) | (4,655) | (1,816) |
Total | (17,817) | (8,133) |
12. Investment in associates
Investment in associates primarily relate to the investment in the telecommunication operator in North Korea (Cheo Technology Koryolink) and Sarwa capital.
The following table provides a breakdown of investments in associates:
Company |
Country |
Ownership | As of December 31, 2019 | As of December 31, 2018 |
Cheo Technology-Koryolink (12-1) | DPRK | 75.00% | 610,908 | 391,804 |
SARWA Capital (12-2) | Egypt | 29.61% | 104,677 | 89,042 |
Electronic Fund Administration Services | Egypt | 20.00% | 18 | 18 |
International Fund Administration Services | Egypt | 20.00% | 31 | 37 |
Axes Holding company | Egypt | 33.90% | 627 | 625 |
Impairment |
|
| (573,183) | (358,087) |
|
|
| 143,078 | 123,439 |
(12-1) Koryolink
The tables below sets forth-summary financial information of the associate.
Summarised balance sheet
(in thousands of US$) | As of December 31, 2019 | As Of December 31, 2018 |
Assets | 1,919,015 | 1,653,133 |
Liabilities | (301,307) | (260,822) |
Net assets | 1,617,708 | 1,392,311 |
Summarised income statement
(in thousands of US$) | For the year ended December 31, 2019 | For the year ended December 31, 2018 |
Revenues | 391,077 | 375,963 |
Total Expense | (170,396) | (163,839) |
Post tax profit from continuing operations | 220,681 | 212,124 |
Share of profit of associates | 165,511 | 159,093 |
The Company's investments in North Korea related primarily to the 75% voting rights in the local telecom operator Koryolink. The accounting treatment has been modified during year ended December 31, 2015. Through, recognizing it as an investment in associates instead of investment in subsidiaries, as the group management believes that the existence of significant influence instead of control. Thus in light of the increase of the restrictions, financial and operating difficulties facing Koryolink due to the international sanction imposed by the international community including the United States of America, the European Union and the United Nations. These sanctions have the effect of restricting financial transactions and the import and export of goods and services, including goods and services required to operate, maintain and develop mobile networks. In addition to, the restrictions implemented on the company that affect the ability of the subsidiary to transfer profits to the parent (return of funds to its native) and
the absence of a free‐floating currency exchange market in North Korea, announced by the Central Bank of North
Korea, other than launching a competing local telecom operator wholly owned by the North Korean Government.
On September 11, 2017 the United Nations Security Council issued a resolution obliging member states of the United Nations to pass laws prohibiting joint ventures and existing partnerships with the North Korean Republic unless approval is obtained to continue such joint ventures. At the present, the company's management submitted an official request through the Government of the Arab Republic of Egypt in order to be excluded from adhering to the said resolution.
On December 26, 2018, the request to the Security Council Committee established to follow up the implementation of sanctions on North Korea was approved, with the exception of Koryolink, to ban foreign investment in North Korea and to allow Orascom Investment Holding to continue its activities in North Korea. And Consider the company as a telecommunications infrastructure company offering a public service.
The following table presents the movement on the investment of koryolink during the year:
(in thousands of US$) | 2019 | 2018 |
As of 1 January | 34,397 | 34,748 |
Share of income of associate before impairment | 165,511 | 159,093 |
Impairment | (165,511) | (159,093) |
Exchange differences | 3,955 | (351) |
As of December 31, | 38,352 | 34,397 |
On December 20,2018, the company purchased number of 216,032,608 share from shares of Sarwa capital, which represents 30% of total equity by price per share 7.36 by total price EGP 1,590 million and it was financed by the contract related to open credit facility with bank Audi by amount of USD 90 million during December 2018.
The Group has prepared the Purchase Price Allocations (PPA) and relevant fair value adjustments of assets, liabilities and related adjustments in the last quarter of 2019. The comparative figures for 2018 have been restated to reflect the final figures which results in a final value of goodwill of 49,059,857 USD as follows:
- On May 9, 2019, the issued and paid-up capital have increased by a decision of Sarwa's Board of Directors held on March 3,2019. The increase of capital through the issuance of 28 Million shares at nominal value of EGP 0.16 amounted to EGP 4,480,000, The total value of the increase is fully funded from the balance of retained earning. The 28 Million shares issued for Employee Stock Ownership Plan ESOP approved by the Egyptian financial regulator authority (FRA) on 26 February 2019.
- On October 3,2019 the issued and paid-up capital have increased by a decision of Sarwa's Board of Directors held on May 13,2019 and authorized by companies extraordinary general assembly dated Sep.8, 2019 through distribution of free shares to shareholders according to their investment percentage by 3 shares for every 5 shares to be financed from retained earning balance.
- Due to the above ESOP increased to be 44.8 Million shares and Company exercised 15.5 Million share for Managers and employees, this leads to decrease the ownership of Orascom Investment Holding percentage from 30% to be 29.61as of 31 December 2019.
The following table presents the movement on the investment of Sarwa during the year:
(In thousand US$) | For the year ended December 31, 2019 | For the year ended December 31, 2018 |
Revenues | 236,240 | 142,232 |
Total expense | (212,010) | (127,387) |
Net profit after tax | 24,230 | 14,845 |
Holding share of net profit | 23,168 | 13,991 |
Share of profit in associates | 6,861 | - |
PPA effect and other |
|
|
Dilution for investment from 30% to 29,61% due to ESOP | (1,226) | - |
Amortization (customer list) | (790) | - |
Deferred tax | 178 | - |
| 5,023 | - |
(In thousand US$) | December 31, 2019 |
Opening balance | 89,042 |
Share of profit in associates | 5,023 |
Paid under increase of investment | 35 |
Currency translation differences | 10,577 |
Ending Balance | 104,677 |
13. Income tax expense
(in thousands of US$) | Note | For the year ended December 31, 2019 | For the year ended December 31, 2018 |
Current tax expense |
| 6,572 | 7,500 |
Deferred tax | (18) | (848) | (1,524) |
Total Income Tax Expenses |
| 5,724 | 5,976 |
14. Property and equipment
(in thousands of US$) | Land and Buildings | Cable system and equipment | Commercial and other tangible assets |
Right of use IFRS 16 | Assets under Construction |
Total |
Cost | 11,838 | 69,735 | 6,903 | 11,678 | 1,752 | 101,906 |
Accumulated depreciation and impairment | (1,117) | (13,203) | (5,007) | (1,577) | (61) | (20,965) |
As of January 1,2019 | 10,721 | 56,532 | 1,896 | 10,101 | 1,691 | 80,941 |
Additions | 95 | 1,917 | 3,073 | 1,802 | 3,388 | 10,275 |
Disposals | - | (4) | (482) | - | - | (486) |
Change in scope of consolidation-out coming | (1,014) | - | (800) | - | - | (1,814) |
Depreciation | (270) | (2,747) | (2,373) | (349) | - | (5,739) |
Depreciation including in discontinued operation | - | - | (65) | - | - | (65) |
Exchange differences | 1,020 | (5,333) | 530 | (484) | (238) | (4,505) |
Assets held for sale | - | - | (79) | (5,249) | - | (5,328) |
Reclassifications | (10) | (3,782) | 5,241 | - | (1,449) | - |
As of December 31,2019 | 10,542 | 46,583 | 6,941 | 5,821 | 3,392 | 73,279 |
Cost | 11,853 | 61,080 | 12,900 | 7060 | 3,392 | 96,285 |
Accumulated depreciation and impairment | (1,311) | (14,497) | (5,959) | (1,239) | - | (23,006) |
The assets include pledged assets of amount of USD 61 Million against credit facilities obtained to finance the cost relating to laying of an undersea fiber optic cable in TWA company.
(in thousands of US$) | Land and Buildings | Cable system and equipment | Commercial and other tangible assets |
Right of use IFRS 16 | Assets under Construction |
Total |
Cost | 13,673 | 346,045 | 9,693 | - | 3,730 | 373,141 |
Accumulated depreciation and impairment | (1,695) | (225,475) | (4,630) | - | (1,859) | (233,659) |
As of January 1,2018 | 11,978 | 120,570 | 5,063 | - | 1,871 | 139,482 |
Additions | 475 | 983 | 3,350 | 11,678 | 2,457 | 18,943 |
Disposals | - | - | (62) | - | - | (62) |
Change in scope of consolidation-In coming | 1,991 | - | - | - | - | 1,991 |
Depreciation | (168) | (3,185) | (1,369) | (1,049) | - | (5,771) |
Depreciation including in discontinued | (297) | (2,771) | (1,638) | (528) | - | (5,234) |
Exchange differences | (1,068) | (6,596) | (5,755) | - | (289) | (13,708) |
Assets held for sale | (2,190) | (50,546) | (3) | - | (1,961) | (54,700) |
Reclassifications | - | (1,923) | 2,310 | - | (387) | - |
As of December31, 2018 | 10,721 | 56,532 | 1,896 | 10,101 | 1,691 | 80,941 |
Cost | 11,838 | 69,735 | 6,903 | 11,678 | 1,752 | 101,906 |
Accumulated depreciation and impairment | (1,117) | (13,203) | (5,007) | (1,577) | (61) | (20,965) |
15. Intangible assets
(in thousands of US$) | License | Goodwill | Easements | Customer Base | Trade Mark | Other | Total |
Cost | 2,628 | 24,917 | 10,706 | 4,391 | 1,409 | 3,638 | 47,689 |
Accumulated amortization and impairment | (2,209) | (458) | (10,278) | (662) | (166) | (65) | (13,838) |
As of January 1,2019 | 419 | 24,459 | 428 | 3,729 | 1,243 | 3,573 | 33,851 |
Additions | 66 | - | 367 | - | - | 137 | 570 |
Amortization | (64) | - | (102) | (233) | (74) | - | (473) |
Amortization included in discontinued operation | - | - | - | (123) | (26) | - | (149) |
Change in the scope of consolidation | (16) | (6,665) | - | - | - | - | (6,681) |
Reclassifications | 40 | 1,882 | (8) | 1,170 | 574 | (3,658) | - |
Assets held for sale * | - | (3,309) | - | (987) | (574) | - | (4,870) |
Exchange differences | (47) | 1,809 | (51) | 356 | 100 | 95 | 2,262 |
As of December 31, 2019 | 398 | 18,176 | 634 | 3,912 | 1,243 | 147 | 24,510 |
Cost | 2,147 | 18,682 | 755 | 4,894 | 1,556 | 148 | 28,182 |
Accumulated amortization and impairment | (1,749) | (506) | (121) | (982) | (313) | (1) | (3,672) |
(in thousands of US$) | License | Goodwill | Easements | Customer Base | Trade Mark | Other | Total |
Cost | 2,502 | 20,522 | 21,956 | 4,421 | 1,409 | 2,044 | 52,854 |
Accumulated amortization and impairment | (719) | (458) | (10,254) | (442) | (140) | (65) | (12,078) |
As of January 1,2018 | 1,783 | 20,064 | 11,702 | 3,979 | 1,269 | 1,979 | 40,776 |
Additions | 267 | - | 238 | - | - | 136 | 641 |
Amortization | (164) | - | (24) | (157) | (19) | - | (364) |
Amortization included in discontinued operation | (163) | - | - | (63) | (7) | - | (233) |
Impairment loss | (1,163) | - | - | - | - | - | (1,163) |
Disposals | (193) | - | - | - | - | - | (193) |
Change in the scope of consolidation in coming | 217 | 6,699 | - | - | - | - | 6,916 |
Reclassifications | (174) | - | 292 | - | - | (118) | - |
Assets held for sale | (242) | - | (11,702) | - | - | (66) | (12,010) |
Exchange differences | 251 | (2,304) | (78) | (30) | - | 1,642 | (519) |
As of December 31,2018 | 419 | 24,459 | 428 | 3,729 | 1,243 | 3,573 | 33,851 |
Cost | 2,628 | 24,917 | 10,706 | 4,391 | 1,409 | 3,638 | 47,689 |
Accumulated amortization and impairment | (2,209) | (458) | (10,278) | (662) | (166) | (65) | (13,838) |
* Goodwill equal to US$ 3,309 thousands as of December 31, 2019 (US$ 3,309 thousands as of December 31, 2018), was reclassified to assets held for sale (see note 32 for more details).
The following table provides an analysis of goodwill by segment reporting:
As Of December 31,2019 As Of December 31,2018
(in thousands of US$)
As of 1 January |
| |||
Cost | ||||
Accumulated impairment Change in scope Reclassification Assets held for sale | ||||
Exchange differences-Cost | ||||
As of 31 December | - 456 17,720 18,176 | - 590 | 23,869 | 24,459 |
Cost | 506 456 17,720 18,682 | 458 590 | 23,869 | 24,917 |
Accumulated impairment | (506) - - (506) | (458) - | - | (458) |
16. Investment Property
The property investment balance comprises the value of seven floors which are owned by Victoire in Brazil. The property investment is carried at its historical cost.
(in thousands of US$) | Year ended December 31, 2019 | Year ended December 31, 2018 |
Cost | 69,993 | 82,067 |
Accumulated amortization and impairment | (5,703) | (5,094) |
As of January 1, | 64,290 | 76,973 |
Depreciation | (1,327) | (1,429) |
Exchange differences | (2,216) | (11,254) |
As of December 31, | 60,747 | 64,290 |
Cost | 67,562 | 69,993 |
Accumulated amortization and impairment | (6,815) | (5,703) |
The fair value of seven floors, which are owned by Victoire in Brazil as property investment on December 31, 2019 amounted to US$ 92 million.
- Investment Property Revenue:
(in thousands of US$) | Year ended December 31, 2019 | Year ended December 31, 2018 |
Rental income | 3,652 | 3,683 |
Direct operating expenses from property that generated rental income | 1,054 | 1,655 |
Direct operating expenses from property that did not generate rental income | 647 | 1,220 |
Leasing arrangement
A substantial part of the investment properties are leased to tenants under long-term operating leases with rentals payable (monthly - in advance or in arrears). Minimum lease payments receivable on leases of investment properties are as follows:
(in thousands of US$) | As of December 31, 2019 | As of December 31, 2018 |
Within one year |
4,761 |
3,670 |
Later than one year but not later than 5 years | 18,547 | 14,680 |
More than 5 years | 2,038 | - |
17. Other financial assets
(in thousands of US$) Financial receivables Restricted Cash (17-1)
Financial assets at fair value through OCI (17-2)
Financial assets at fair value through profit or loss (17-3)
Total
The following table shows the ageing analysis of financial receivables and long-term deposits:
| As Of December 31, 2019 | As Of December 31, 2019 |
(in thousands of US$) | Financial receivables | Financial receivables |
Not past due | 4,785 | 1,063 |
Past due 0-30 days | - | - |
Past due 31-120 days | - | - |
Past due 121-150 days | - | - |
Past due more than 150 days | 6,882 | 3,071 |
| 11,667 | 4,134 |
17-1 Restricted cash
As Of December 31, 2019 As Of December 31, 2018
(in thousands of US$) Non-current Current Total Non-current Current Total
Pledged deposits
Cash on banks in North Korea
Total 7,138 121 7,259 7,550 101,982 109,532
17-2 Financial assets at fair value through OCI and available for sale
(in thousands of US$) Company name | As of December 31, 2019 | As of December 31, 2018 |
Egypt Opportunities Fund | 2,041 | 2,252 |
Misr for Central Clearing Depository and Registry | 478 | 429 |
EGX 30 | 506 | 420 |
Guarantee Settlement Fund | 318 | 375 |
El Arabi for Investment | 12 | 11 |
BMG | 6 | - |
MENA Capital | 167 | 172 |
(Less) Impairment loss | (167) | (166) |
Total | 3,361 | 3,493 |
17-3 Financial assets at Fair Value Through profit or Loss
(in thousands of US$) | As of December 31, 2019 | As of December 31, 2018 |
Investment in cash investment funds | - | 816 |
Investment in investment funds | 34 | 813 |
Treasury Bills | - | 424 |
Total | 34 | 2,053 |
Transaction price allocated to the remaining performance obligations
The following table includes revenue expected to be recognised in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the reporting date.
(in thousand of US$) | 2020 | 2021 | 2022 | 2023 | 2024 | More than 5 year |
IRU LDN (TWA) | 598 | 598 | 598 | 598 | 598 | 2,591 |
IRU Omantel (TWA) | 846 | 846 | 846 | 846 | 846 | 8,178 |
18. Deferred taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred income tax assets and liabilities relate to income taxes due to the same tax authority.
(in thousands of US$) | As Of December 31,2019 | As Of December 31,2018 |
Deferred tax liabilities, gross | (13,000) | (15,653) |
Deferred tax assets offset | 550 | 388 |
Deferred tax liabilities | (12,450) | (15,265) |
The movement in deferred income tax liabilities is as follows:
(in thousands of US$) | As Of December 31, 2019 | As Of December 31, 2018 |
As of January 1, | (15,265) | (24,116) |
(Charged )/ credited to the income statement | 848 | 1,838 |
Change in scope of consolidation | 376 | 5,085 |
Liabilities held for sale | 593 | - |
Income tax for dividends distributed | 954 | - |
Exchange differences | 44 | 1,928 |
As of December 31, | (12,450) | (15,265) |
A breakdown of the movement in deferred tax liabilities is provided in the tables below:
Deferred tax liabilities | Depreciation and amortization | Unremitted earnings |
Forex |
Other |
Total |
(in thousands of US$) |
|
|
|
|
|
As of January 1st, 2019 | (10,346) | (2,272) | (3,524) | 877 | (15,265) |
(Charged )/ credited to the income statement | (2,089) | (1,293) | 3,320 | 910 | 848 |
Change in scope of consolidation | - | - | - | 376 | 376 |
Liabilities held for sale | - | - | - | 593 | 593 |
Income tax for dividends distributed | - | 954 | - | - | 954 |
Exchange differences | 665 | (170) | (228) | (223) | 44 |
Reclassification | (654) | 950 | 177 | (473) | - |
As of December 31, 2019 | (12,424) | (1,831) | (255) | 2,060 | (12,450) |
Deferred tax liabilities | Depreciation and amortization | Unremitted earnings |
Forex |
Other |
Total |
(in thousands of US$) | |||||
As of January 1st, 2018 | (12,145) | (959) | (11,271) | 259 | (24,116) |
(Charged )/ credited to the income statement | (58) | (1,329) | 2,399 | 826 | 1,838 |
Change in scope of consolidation | - | - | 5,085 | - | 5,085 |
Exchange differences | 1,857 | 16 | 263 | (208) | 1,928 |
As of December 31, 2018 | (10,346) | (2,272) | (3,524) | 877 | (15,265) |
Generally, the Group does not recognise deferred tax assets for temporary differences related to accruals for provisions, due to uncertainties in connection with the tax treatment of such expenses, as they might be challenged by local tax authorities.
No deferred tax liability has been recognised in respect of temporary differences associated with investments in subsidiaries, branches and associates, where the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.
Should additional information arise in future periods resulting in differences between the tax base and accounting base of recorded assets and liabilities in the financial statements as at December 31, 2019, Management will reassess its estimate in a way that might result in the recognition of deferred taxes related to those assets and liabilities.
19. Trade receivables
(in thousands of US$) | As Of December 31,2019 | As Of December 31,2018 |
Receivables due from customers | 66,736 | 61,704 |
Receivables due from telephone operators | 22,885 | 20,466 |
Other trade receivables | 1,097 | 689 |
Allowance for doubtful receivables | (35,939) | (29,590) |
Total | 54,779 | 53,269 |
The following table shows the movement in the allowance for doubtful receivables:
(in thousands of US$)
At January 1
Additions (allowances recognized as an expense) Used
Reversal
Exchange differences
At December 31,
The following table shows the ageing analysis of trade receivables as of 31 December 2019 and 2018, net of the relevant allowance for doubtful receivables:
(in thousands of US$)
Not past due
Past due 0-30 days Past due 31-120 days
Past due 121 - 150 days
Past due more than 150 days
Trade receivables
The maximum exposure to credit risk at the reporting date is the carrying value of the receivable. The Group does not hold any collateral as security.
20. Other non-financial assets
(in thousands of US$)
Prepaid expenses Advances to suppliers
Receivables due from tax authority Employee loans
Assets from current tax Other non trade receivables
Allowance for doubtful current assets
Total
21. Cash and cash equivalent
(in thousands of US$) | As Of December 31,2019 | As Of December 31,2018 |
Bank accounts and Deposits* | 63,376 | 106,491 |
Cash on hand | 62 | 74 |
Total | 63,438 | 106,565 |
* Bank account and deposit as of December 31, 2019, includes an amount of $ 1.6 million represent cash held in Lebanon bank accounts, in accordance with the restrictions imposed by the Lebanese government on local banks in Lebanon and restrictions on cash transfers outside the country.
22. Equity attributable to the owners of the Company Share capital
On 29 November 2011, the Company was incorporated with an authorised and issued share capital amounting to EGP 2,203,190,060 Million (equivalent to US$ 366,148 thousand at date of transactions) distributed over 5,245,690,620 shares, each with a nominal value of EGP 0.42.
Non-distributable earnings
Retained earnings include an amount of US$ 1,853 thousand as of December 31,2019 compared to US$ 1,511 thousand as of December 31,2018, which is not available for distribution representing a legal and special reserves at the subsidiaries level.
23. Borrowings
(in thousands of US$) Liabilities to banks Finance lease liability Other borrowings
Loans for Trans World associate
Borrowings include loans obtained from the shareholders of Trans World associate private by an amount of US$
1.9 Million of which US$ 1 Million due within one year and US$ 0.9 Million due after more than one year with an interest rate of 3.45% per annum.
Borrowings also include loans obtained from banks amounted to US$ 24.2 Million from which US$ 6.1 Million due within one year and US$ 18.1 Million due after more than one year these borrowings were obtained by Trans World Associate Private with interest rates ranges between 12.48% to 15.44%.
Loan for the purpose of financing the acquisition of Victoire Group:
On September 28, 2015 the company borrowed non-current loan from a foreign bank by a maximum amount of USD 35 Million for the sole purpose of financing 50% of the purchase price of seven floors in the "Patio Malzoni Faria Lima Tower A" in Sao Paolo, Brazil through the direct or indirect acquisition of the shares of the following companies incorporated in Brazil: Victoire 2, Victoire 9, Victoire 11, Victoire 13, Victoire 17, Victoire 18, and
Victoire 19.
- Finance cost US$ 100 Thousand, worth on the date of signing the contract.
Interest and interest period
Interest shall be set at a variable rate of US Dollar the subjected bank reference rate +1%, currently set at 7.82% per annum.
The interest shall be calculated on the basis of a year of Three hundred Sixty (360) days and the actual number of days elapsed.
Financial covenants
The loan shall be covered at 200% by the real estate value of the floors during the financing period, and valuation of the floors should occur every 6 months at the borrower's expenses.
In the event the coverage falls at or below 175%, and at the option of the borrower, the loan will either be reduced to maintain the ratio of 200%, or the borrower must grant an additional security acceptable to the lender in order to maintain the coverage ratio at 200%.
Securities
- In favour of the lender of the total acquired shares in the capital of the companies owning the floors, and the borrower shall deliver the certificates of the shares pledged.
- A chattel mortgage on all floors duly registered at the relevant real estate register in Sao Paolo Brazil.
- The borrower pledges to assign in favour of the lender of rental proceeds of the floors. The proceeds will be transferred to the borrower's account with the lender to cover interest and constitute a reserve account covering one interest payment.
- An irrevocable undertaking by the borrower to cover by the second anniversary of the first drawdown, the balance of the loan in principal and interest by a pledge account opened in his name.
- On October 18, 2017 Orascom Investment Holding Company performed a reschedule agreement with bank Libano Francaise through which the loan amounted US$ 33.4 million will be long-term loan due on three instalments starts from October 2019 and ends October 2021, Provided that the total amount of the loan is mortgaged until the Company fulfills the above mentioned guarantees.
Other credit facilities:
- On December 13, 2018, the Company made an agreement to open credit facility amounted to US$ 90,000,000 secured by US$ time deposits, where the percentage of finance makes up 90% of the secured time deposits and on August 18, 2019 the company fully settled credit facility from pledged time deposit which guarantee credit facility.
- The credit bank facilities granted to Beltone Financial Holding one of Group components for financing the settlement of guarantee against payment concerning brokerage sector and these facilities are unsecured and bearing average interest market rate.
The following table shows the movement of borrowings during the year: Liabilities to banks and Other Borrowings as of December 31, 2019 Liabilities due to banks and other Borrowings are detailed in Appendix B.
| within one year |
1-2 years |
2-3 years |
3-4 years |
4-5 years |
after 5 years |
Total |
(in thousands of US$) | |||||||
Liabilities to banks 2019 | 45,695 | 7,847 | 5,993 | 3,930 | 129 | 259 | 63,853 |
Liabilities to banks 2018 | 109,335 | 4,353 | 32,122 | 1,739 | 4,276 | 4,518 | 156,343 |
Finance lease liability 2019 | 745 | 1,592 | 856 | 843 | 596 | 1,081 | 5,713 |
Finance lease liability 2018 | 369 | 2,460 | 1,692 | 1,821 | 1,791 | 2,905 | 11,038 |
Other borrowings 2019 | 1,044 | 492 | 390 | - | - | - | 1,926 |
Other borrowings 2018 | 1,618 | 242 | 393 | 491 | - | - | 2,744 |
As Of December 31,2019 | 47,484 | 9,931 | 7,239 | 4,773 | 725 | 1,340 | 71,492 |
As Of December 31,2018 | 111,322 | 7,055 | 34,207 | 4,051 | 6,067 | 7,423 | 170,125 |
Finance lease liabilities
(in thousands of US$) | As of December 31, 2019 | As of December 31, 2018 |
Gross finance lease liabilities - minimum lease payments |
|
|
Within one year | 745 | 1,474 |
Between 1-5 years | 3,887 | 7,359 |
Over 5 years | 1,081 | 3,155 |
Future finance charges on finance leases | - | (950) |
Present value of finance lease liabilities | 5,713 | 11,038 |
The present value of finance lease liabilities is as follows: |
|
|
Within one year | 745 | 369 |
Between 1-5 years | 3,887 | 7,764 |
Over 5 years | 1,081 | 2,905 |
| 5,713 | 11,038 |
Other Borrowings
Other borrowings mainly include loans from non-controlling shareholders in subsidiaries. The detail of "Other borrowings" is included in Appendix B.
Currency Information of current and non-current borrowings
The following table provides the breakdown of total borrowings by currency of issue:
(in thousands of US$) |
US$ | Egyptian Pound |
Pakistan Rupee |
Others |
Total |
|
|
|
|
|
|
As of December 31,2019 | 25,946 | 16,202 | 29,344 | - | 71,492 |
As of December 31,2018 | 131,914 | 5,589 | 32,622 | - | 170,125 |
The following table illustrate the movements in the borrowings during the period
(in thousands of US$) |
As of December 31, 2019 |
As of December 31, 2018 |
Current borrowings | 111,322 | 15,087 |
Non-current borrowings | 58,803 | 64,495 |
Balance at the beginning of the year | 170,125 | 79,582 |
payments of loans | (104,493) | (22,680) |
Proceeds from loans | 12,981 | 110,142 |
Transferred to Liabilities held for sale | (6,234) | - |
Interest paid | (10,864) | (9,315) |
Interest paid for discontinued operations |
| (292) |
Foreign exchange differences | 9,977 | 12,688 |
Balance at the end of the year | 71,492 | 170,125 |
Current borrowings | 47,485 | 111,322 |
Non-current borrowings | 24,007 | 58,803 |
-Details of borrowings are included in appendix B.
24. Trade payables and other liabilities
(in thousands of US$) As Of December 31,2019 As Of December 31,2018
Current Non-current Total Current Non-current Total
Trade Payable |
| |||
Capital expenditure payables | 5,006 | - 5,006 | 4,752 | - 4,752 |
Trade payables due to suppliers | 15,042 | - 15,042 | 8,439 | - 8,439 |
Customers credit balance | 13,501 | - 13,501 | 41,038 | - 41,038 |
Trade payables to Telephone operator | 1,004 | - 1,004 | 2,835 | - 2,835 |
Other trade payables | 2,579 | - 2,579 | 2,827 | - 2,827 |
Total 37,132 - 37,132 59,891 - 59,891
Other payable
Prepaid traffic and deferred income | 806 | 7,642 | 8,448 | 339 | 3,408 | 3,747 |
Due to local authorities | 3,181 | - | 3,181 | 3,155 | - | 3,155 |
Personnel payables | 1,104 | - | 1,104 | 3,022 |
| 3,022 |
Subscriber deposits | 48 | - | 48 | 38 |
| 38 |
Other credit balances | 32,195 | - | 32,195 | 8,543 | 22,436 | 30,979 |
Total | 37,334 7,642 44,976 | 15,097 | 25,844 | 40,941 | ||
Total | 74,466 7,642 82,108 | 74,988 | 25,844 | 100,832 | ||
The other credit balance includes the balance of employee benefits where OIH by virtue of the Management Agreement signed with the Ministry of Telecommunications manages MIC1 SAL on behalf of the republic of Lebanon owner of both mobile networks operators. Orascom Telecom Lebanon SAL (OTL) is created in order to manage the personnel of MIC, as employer, yet all personnel costs are charged to and reimbursed by the Lebanese Government as per the term of the management agreement, This balances classified as non-current in 2018 while in 2019 classified as current due to termination of management contract with ministry of Telecommunications
the break down of employees benefit which included in current other credit balance as below:
(in thousands of US$) | As of December 31, 2019 |
Benefits paid/ disbursements |
Contributions | Reclassed from non-current to current other credit balance | As of December 31, 2018 |
Employees termination benefits | 12,641 | (906) | 793 | 12,754 | - |
Other defined benefit obligations | 7,255 | (9,670) | 7,255 | 9,670 | - |
Total employee benefits | 19,896 | (10,576) | 8,048 | 22,424 | - |
The following table illustrate the movements in prepaid traffic and deferred income during the year:
(in thousands of US$) |
As of December 31, 2019 |
Currency translation |
Other Changes | Amounts recognised within Revenue | Additional amounts arising over the year |
As of January 1, 2019 |
Deferred Revenue - current | 806 | (446) | 282 | 217 | 414 | 339 |
Deferred Revenue - non-current | 7,349 | (350) | (282) | - | 4,573 | 3,408 |
Long term payable TES | 293 | - | - | - | 293 | - |
| 8,448 | (796) | - | 217 | 5,280 | 3,747 |
(in thousands of US$) |
As of December 31, 2018 |
Liability held for sale |
Other Changes | Amounts recognised within Revenue | Additional amounts arising over the year |
As of January 1, 2018 |
Deferred Revenue - current | 339 | 1,344 | (56) | 176 | (220) | 1,583 |
Deferred Revenue - non-current | 3,408 | 9,957 | (171) | - | - | 13,194 |
| 3,747 | 11,301 | (227) | 176 | (220) | 14,777 |
25. Provisions
(in thousands of US$) | As of December 31, 2019 | As of December 31, 2018 |
As of January 1, | 23,041 | 20,723 |
Additions | 5,867 | 8,833 |
No longer required | (3) | - |
Currency translation differences | 2,817 | 118 |
Change in scope | - | (6,633) |
Utilized | (1,860) | - |
As of December 31, | 29,862 | 23,041 |
26. Earnings per share
Basic and diluted
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. For the purposes of the earnings per share calculation, it has been assumed that the number of issued shares at the date of incorporation (5,245,690 thousand) had been outstanding during the year.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. During the period covered by the report, the Company did not have any dilutive potential ordinary shares and as such diluted and basic earnings per share from continuing operations and from discontinued operations are equal.
(in thousands of US$) | For the year ended | For the year ended |
| December 31, 2019 | December 31, 2018 |
Profit attributable to equity holders of the Company from continuing operations (in thousands of US$) | (29,462) | (6,584) |
Weighted average number of shares (in thousands of shares) | 5,245,691 | 5,245,691 |
Earnings per share - basic and diluted (in US$) | (0.0056) | (0.001) |
Earnings / (Losses) per share from discontinued operations - basic and diluted (in US$)
(in thousands of US$) | For the year ended | For the year ended |
| December 31, 2019 | December 31, 2018 |
Profit attributable to equity holders of the Company from discontinued operations (in thousands of US$) | 3,441 | (52,665) |
Weighted average number of shares (in thousands of shares) | 5,245,691 | 5,245,691 |
Earnings per share - basic and diluted (in US$) | 0.0007 | (0.01) |
27. Business Combination
27-A Auerbach Grayson Company
On September 25, 2016, the BOD of Beltone Financial Holding approved the acquisition of 60 % of AGCO Company through one of subsidiaries (New Frontier securities -USA) by US$ 24 million. The acquisition agreement includes three call / put options as follows:
1- Within one year from the agreement date , the seller has the right to purchase 9% of AGCO shares which is owned by New Frontier Securities company against an agreed upon consideration and conditions.
2- Commencing 3 years from the agreement date. The buyer has the option to buy part or all of Non-Controlling Interest (NCI) against an agreed upon consideration and conditions.
3- Commencing 5 years from the agreement date, the seller has the option to exercise a right to sell all of its shares against an agreed upon consideration and conditions.
On January 30, 2017 the company had the USA regulatory approval to practice brokerage activity in US$ and to acquire a share in Auerbach Grayson & Company -USA (AGCO) and the rest of procedures were followed till February 1, 2017 which is considered as the "acquisition date".
The company determined the primary accounting for business combination for acquiring AGCO temporarily on February 1,2017. and to continue the study of the fair value of determined identifiable assets and liabilities including the intangible assets in the acquisition date (if exists)
According to the agreement, an amount of US$ 2 million were escrowed as the group has the right of deducting any unrecorded liabilities could arise (For example but not limited to : Law suits or any events result in Financial damage , customer troubles, Vendors etc. ……).
It was subsequently agreed that this value amounted to US$676 500
The Group has prepared the Purchase Price Allocations (PPA) and relevant fair value adjustments of assets, liabilities and related adjustments in the last quarter of 2018. The comparative figures for 2017 have been restated to reflect the final figures (note no 33) which results in a final value of goodwill of 3 300 385 US$ as follows:
(in thousands of US$) | As of February 1, 2017 |
Intangible assets | 3 013 |
Net owned assets | 16 975 |
| 19 988 |
Acquisition percentage | 60% |
| 11 993 |
Derivatives | 8 070 |
Deferred tax liability | (687) |
Holding Company's share of net assets acquired | 19,376 |
Consideration |
|
Cash | (22 000) |
Deferred consideration | (676) |
Total Considerations | (22 676) |
Goodwill | (3 300) |
The balance of financial derivatives represented at fair value of the right of the second option of New Frontier company is as follows:
(in thousands of US$) | 31 December 2019 | 31 December 2018 |
| USD | USD |
Derivatives - options | - | 4,862 |
| - | 4862 |
27-B Discontinued Operations
Discontinued operations represent as following:
(in thousands of US$) |
| For the year end December 31, 2019 | For the year end December 31, 2018 |
Discontinued operation from Riza capital disposal | 17-B-1 | 5,226 | (6,596) |
Discontinued operation from Auerbach Grayson Held for sale | 17-B-2 | (5,585) | (6,528) |
Discontinued operation from Mena cable disposal | 17-B-3 | - | (46,128) |
(Loss) from discontinued operation (net of income tax) |
| (359) | (59,252) |
27-B-1 Riza Capital
On September 10, 2019, OTMT Brazil Holding sold its entire shares in Riza Capital, with an ownership of 57.5%, to Marko Auriello for a consideration amounting to US$ 13,323,850 paid on six semi-annual installments, each amounting to US$ 2,220,642, where the last installment will be received on February 28, 2022.
Discontinued operations calculated as the following for the period ended December 30, 2019:
(in thousands of US$)
December 31, 2019 | |
Proceeds from sale | 13,243 |
(Less): |
|
Net assets | (5,445) |
Foreign exchange differences excluded | 197 |
Net assets (Minority share) | (912) |
Losses of Riza Capital for the year | (1,857) |
Group's profits from the disposal | 5,226 |
Riza Capital's Losses for the year presented as following:
(in thousands of US$) | December 31,2019 | December 31,2018 |
Operating revenue | 2,896 | 3,223 |
Operating expenses | (1,590) | (715) |
Operating Loss | 1,306 | 2,508 |
Other expenses | (3,163) | (9,104) |
Net income for the year | (1,857) | (6,596) |
Distributed as |
|
|
The company's share | (1,068) | (3,795) |
The minority's share | (789) | (2,801) |
| (1,857) | (6,596) |
27-B-2 Auerbach Grayson
During the year, a board of directors of Beltone decided to authorize the chairman and managing director to take the necessary decisions and negotiate for selling of Beltone Financial Holding's stake in Auerbach Grayson, which is wholly owned by NEW FRONTIER (one of Beltone's subsidiaries) and the company started activity to determine The buyer , Accordingly Auerbach Grayson assets and liabilities presented as held for Sale in accordance with IFRS Standard No. (5).
Auerbach Grayson's Losses for the year presented as following:
(in thousands of US$) | December 31,2019 | December 31,2018 |
Revenues | 17,150 | 20,497 |
Total revenues | 17,150 | 20,497 |
Other expense | (22,792) | (27,113) |
Deferred tax | 57 | 88 |
Net losses for the year | (5,585) | (6,528) |
27-B-3 MENA Cable
On May 21, 2018 Orascom Investment Holding S.A.E. (Formerly Orascom Telecom Media and Technology Holding). ("OIH") announced that it has executed a Sale and Purchase Agreement with Egyptian International Submarine Cables Company, a 50% owned Subsidiary of Telecom Egypt, for the sale of its entire, direct and indirect, shareholding of its subsidiary Middle East and North Africa Submarine Cable ("MENA Cable") for a total value of USD 90 million. OIH holds a 100% stake in MENA Cable.
Discontinued operations calculated as the followings:
(in thousands of US$) | December 31,2019 | December 31,2018 |
Proceeds from sale | - | 87,633 |
Less: |
|
|
Selling expenses | - | (327) |
Liabilities held for sale | - | 27,583 |
Assets held for sale | - | (82,417) |
Mena Cable Losses for the period | - | (5,522) |
Foreign exchange differences excluded | - | (78,305) |
Deferred taxes | - | 5,227 |
Group profits from disposal | - | (46,128) |
Mena Cable Losses for the period
(in thousands of US$) | December 31,2019 | December 31,2018 |
Operating revenue | - | 2,019 |
Cost of purchases, service and other expense | - | (7,541) |
Operating Loss | - | (5,522) |
Income tax | - | - |
Total | - | (5,522) |
28. Subsidiaries
Represent non-wholly owned subsidiaries with material non-controlling interest (Beltone and TWA)
Company | Country | Percentage of non-controlling ownership Value of non-controlling ownership |
(in thousands of US$) |
|
|
Transworld associate (TWA) Beltone financial management | Pakistan Egypt |
|
All subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertakings held directly by the Company do not differ from the proportion of ordinary shares held. The Company does not have any shareholdings in preference share of subsidiaries included in the Group.
Summarised financial information of non-wholly owned subsidiaries with material non-controlling interests.
nt
The above information is the amount before intercompany eliminations.
(in thousands of US$) Trans World Associates (Pvt) Ltd Beltone financial management
Revenue
Profit (loss) before income tax Income tax expense
Post tax profit (loss) from continuing operations
Loss from discontinued operation Other comprehensive (loss) \ income Total comprehensive income
Total comprehensive income allocated to non-controlling interests
The above information is the amount before intercompany eliminations.
(in thousands of US$) Trans World Associates (Pvt) Ltd Beltone Financial Management For the year ended December 31, For the year ended December 31,
2018
Net cash flows generated by / (used in) operating activities |
| ||
Net cash flows generated by / (used in) investing activities | |||
Net cash flows generated by / (used in) financing activities | |||
Net change in cash during the year | (1,542) | 2,381 (33,388) | (15,232) |
Effect of exchange rates on cash and cash equivalents |
| ||
Cash and cash equivalent at the beginning of the year | |||
Cash and cash equivalent at the end of the year | |||
The above information are the amount before intercompany eliminations.
29. Commitments
The commitments as of 31 December 2019 and 2018 are provided in the table below:
(in thousands of US$) | As of December 31,2019 | As of December 31, 2018 |
Purchase of property and equipment | 915 | 5,214 |
Others | 9,129 | 12,054 |
Total | 10,044 | 17,268 |
Other capital engagements are the group's obligations arising from the lease commitment of Auerbach Grayson & Co for the amount equivalent to US$5.75 million , plus the amount equivalent to US$1.9 million to the contract of Trans World associates (subsidiary).
Related party transactions
Transactions with subsidiaries, associates, with the Parent Company and its subsidiaries and other related parties are not considered atypical or unusual, as they fall within the Group's normal course of business and are conducted under market conditions that would be performed by independent third parties.
The main related party transactions are summarised as follows:
(in thousands of US$)
OTMT
CHEO
Others
LTD Orastar
Dr Omar Zawawy (shareholder of a subsidiary)
(in thousands of US$)
LTD Orastar
Omar Zawawy (shareholder of a subsidiary) Belton Mena Equity Fund
EGX funds company Misr Beltone
International Fund Management Service Co.
Electronic Fund Management Service Co.
As of December 31, 2018
Receivables Payables
- 2,832
- 726
27 -
1 -
- 339
- 106
- 34
Key management compensation
Key management includes executive and non-executive directors, the chief financial officer and other managing directors considered key personnel.
The compensation paid or payable to key management for employee services amounted to US$ 1,342 thousand and US$ 2,812 thousand respectively for the year ended December 31, 2019 and 2018.
31. Contingent assets and liabilities
The contingent liabilities, are represented in guarantees issued by the holding company and related to the activities of its subsidiaries, as follows:
Transworld Associates (Subsidiary)
- Bank guarantee issued in favor of Higher Education Commission (HEC) amounting to US$37,540 valid till December 31, 2020.
- 'Bank guarantees issued in favour of Inbox Business Technologies (Private) Limited amounting to US$ 35,087 valid till May 09, 2020.
- 'Letter of credit issued in favour of Huawei International Co. Ltd. amounting to CNY 630,745.56 valid till January 21, 2020.
- Letter of credit issued in favour of Subcom, LLC amounting to US$ 6,408 valid till January 21. 2020.
- 'Letter of credit issued in favour of Premier Systems FZE amounting to US$ 410,000 valid till April 04, 2020.
32. Assets and Liabilities held for sale
During the year, a board of directors of Beltone decided to authorize the chairman and managing director to take the necessary decisions and negotiate for selling of Beltone Financial Holding's stake in Auerbach Grayson, which is wholly owned by NEW FRONTIER (one of Beltone's subsidiaries) and the company started activity to determine The buyer , Accordingly Auerbach Grayson assets and liabilities presented as held for Sale in accordance with IFRS Standard No. (5).
Assets held for sales | 31/12/2019 |
(in thousands of US$) |
|
(in thousands of US$) |
|
Fixed assets | 4,202 |
Intangible Assets | 1,560 |
Goodwill | 3,309 |
Due from companies operating in the securities field | 294 |
Account receivable | 1,241 |
Debtors and other debit balance | 1,957 |
Cash and Cash at bank | 1,287 |
Total Assets held for sales | 13,850 |
Liabilities associated to assets held for sale |
|
Deferred tax | 593 |
Trade payable and other credit balances | 1,797 |
Lease liabilities | 4,884 |
Total Liabilities associated to assets held for sale | 7,274 |
33. Opening balance Restatement
The following schedule summarize the reclassification of comparative figures of the consolidated profit or loss for the year ended 31 December 2018 to match current year classifications as follows:
Continued Operations (in thousands of US$) |
As Issued |
Reclassification |
Represented |
Revenues | 98,289 | (23,630) | 74,659 |
Other income | 12,579 | (89) | 12,490 |
Purchases and services | (48,109) | 17,723 | (30,386) |
Other expenses | (15,053) | 926 | (14,127) |
Personnel cost | (38,914) | 16,367 | (22,547) |
Depreciation and amortization | (8,627) | 1,063 | (7,564) |
Impairment charges | (1,102) | 82 | (1,020) |
Disposal of non-current assets | (187) | - | (187) |
Operating income/ (loss) | (1,124) |
| 11,318 |
Financial income |
3,453 |
(3) |
3,450 |
Financial expense | (9,923) | 156 | (9,767) |
Foreign exchange (loss) | (2,434) | 618 | (1,816) |
Share of profits of investment in associates | 159,093 | - | 159,093 |
Impairment of investments in associate | (159,093) | - | (159,093) |
(loss)/Profit before income tax | (10,028) |
| 3,185 |
Income tax expense | (5,887) | (89) | (5,976) |
(Loss)/ Profit for the year | (15,915) |
| (2,791) |
Discontinued operations |
|
|
|
Profit / (Loss) from discontinued operation (net of income tax) | (46,128) | (13,124) | (59,252) |
(Loss)/ Profit for the year | (62,043) |
| (62,043) |
34. Subsequent events
- The recent outbreak of the novel coronavirus (COVID-19) continues to impact the global economy and markets. Going forward the COVID-19 outbreak may negatively impact amongst others our supply chain, workforce, operations, demand of our end markets, and liquidity.
Accordingly, The Management has set up a COVID-19 taskforce to develop and implement contingency plans, and we are closely and continuously evaluating the developments. We will take all necessary actions to keep our operations
running and, most importantly, protect our employees, suppliers, customers and all other stakeholders. Based on our current knowledge and available information, we do not expect COVID-19 to have an impact on our ability to continue as a going concern in the foreseeable future.
- During January 2020, the company made early payment of the full value of the loan related to direct or indirect acquisition of the shares of the companies that own the Brazil Building, the balance of the loan on December 31, 2019, amounted to 23,413 thousand dollar, as the shares were unpledged by the bank during January 2020.
- On February 27, 2020, the Board of Directors of Sarwa Capital Company proposed to distribute cash dividends to shareholders for the fiscal year ending December 31, 2019, with a total value of 117,759,480 EGP, the share of the profits will be 10 piasters per share, the company's share of the dividends declared will be about 34.5 million Egyptian pounds before the tax on dividends.
- On December 2019, the company's board of directors received a letter from the Lebanese Ministry of Communications regarding the non-renewal of the management contract concluded between Orascom Investment Holding Company and the Lebanese Ministry of Communications, due to the current events in Lebanon, the company was not handed over to the Lebanese Ministry of Communications, and the group has managed the Lebanese company till now with the same conditions as the old contract. During September 2020, the process of transferring the management of Alfa Company from Orascom Telecom Lebanon to the Ministry of Communications was completed, in implementation of the Cabinet Resolution issued on May 5, 2020 and after fulfilling all the requirements of the management contract.
- During April 2020, Beltone Financial Holding, which is owned by Orascom Investment Holding Company by 74.55%, has signed an agreement to sell its subsidiary Auerbach Grayson with a group of investors. All sales procedures will be terminated after obtaining the approval of the Financial Sector Authority in the United States of America.
- On July 9, 2020, the board of directors of the Company approved the detailed demerger plan of the Company into two companies where the demerged company will be called "Oracom Investment Holding" (the demerged company) where it will include company's investments in companies that operate in different fields. The other company will be called "Orascom Financial Holding" (the new company) which will include the investments of the company in companies that operate in the financial-non-banking sector which are Beltone financial holding (subsidiary) and Sarwa capital (associate). On September 6, 2020, the Egyptian Financial Supervisory Authority approved the detailed division project for the company, and the extraordinary general meeting is being invited to approve the division project.
- On September 30, 2020, Orascom Pyramids for Entertainment (one of the group's subsidiaries) signed a long-term financing contract with the Societe Arabe Internationale de Banque with an amount of EGP 230 million to be repaid on 24 quarter-annual installments starting from January 2023 and ending on October 2028.
35. Reclassification of some comparative numbers:
- During the year ended December 31, 2019, the company reclassified the comparative figures of the retained earnings and translation reserve related to the year ended December 31, 2018, in order to correct an amount charged to the currency translation reserve instead of the retained earnings, in one of the group's subsidiaries, amounting to USD 2,213 M.
Chief Financial Officer Executive Chairman and Managing Director
Khalid Ellaicy Naguib Sawiris
APPENDIX A - SUBSIDIARIES, ASSOCIATES AND INVESTMENTS AS OF 31 DECEMBER 2019
Segment |
Country of incorporation and place of business |
Entity name |
Nature of business |
Proportion of ordinary shares held by the Company (%) |
Proportion of ordinary shares held by OTMT Group (%) | Proportion of ordinary shares held by the non- controlling interest (%) |
Investment type |
Media and Technology | North Korea | Orabank NK | Other | % 95 | 95% | 5% | Subsidiary |
Media and Technology | Pakistan | Trans World Associates (Pvt) Ltd | Cables | 51% | 51% | 49% | Subsidiary |
Media and Technology | Egypt | Oracap Holding Co. (Free zone) | Other | 100% | 100% | 0.00% | Subsidiary |
Media and Technology | Malta | Oracap Far East Ltd | Other | 100% | 100% | 0.00% | Subsidiary |
Management services | Lebanon | Orascom Telecom Lebanon | Management services | % 99,8 | 99,8% | 0.20% | Subsidiary |
Financial Services | UAE | Beltone Financial - Emirates | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | Egypt | Beltone Securities Brokerage "S.A.E" | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | Libya | International For Securities Company - Libya | Financial services | 49% | 34.3% | 51% | Subsidiary |
Financial Services | Egypt | Beltone Market Maker "S.A.E" | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | USA | Beltone Financial - USA | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | UK | Beltone Financial - UK | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | Egypt | Beltone Information Technology "S.A.E" | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | Egypt | Beltone Securities Holding "S.A.E" | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | Egypt | Beltone Securities Brokerage "S.A.E" | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | Egypt | Beltone Financial Holding "S.A.E" | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | Egypt | Beltone Investment Funds "S.A.E" | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | Egypt | Beltone Promotion and Underwriting"S.A.E" | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | Egypt | Beltone Investments Holding- free zone "S.A.E" | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | USA | Auerbach Grayson for Securities Brokerage | Financial services | 100% | 70% | 30% | Subsidiary |
Financial Services | Brazil | Riza Capital | Financial services | 57% | 57% | 43% | Subsidiary |
Other | Luxembourg | OTMT - Brazil | other | 100% | 100% | 0.00% | Subsidiary |
Investment Property |
Netherlands |
Victoire coop Investment Holding |
Investment Property |
100.00% |
100.00% |
0.00% |
Subsidiary |
Investment Property | Netherlands | Victoire BV | Investment Property | 100.00% | 100.00% | 0.00% | Subsidiary |
Investment Property | Brazil | Victoire 2 (Brazil) | Investment Property | 100.00% | 100.00% | 0.00% | Subsidiary |
Investment Property | Brazil | Victorie 9 (Brazil) | Investment Property | 100.00% | 100.00% | 0.00% | Subsidiary |
Investment Property | Brazil | Victoire 11 (Brazil) | Investment Property | 100.00% | 100.00% | 0.00% | Subsidiary |
Investment Property | Brazil | Victoire 13 (Brazil) | Investment Property | 100.00% | 100.00% | 0.00% | Subsidiary |
Investment Property | Brazil | Victoire 17 (Brazil) | Investment Property | 100.00% | 100.00% | 0.00% | Subsidiary |
Investment Property | Brazil | Victoire 18 (Brazil) | Investment Property | 100.00% | 100.00% | 0.00% | Subsidiary |
Investment Property | Brazil | Victoire 19 (Brazil) | Investment Property | 100.00% | 100.00% | 0.00% | Subsidiary |
Energy | Egypt | O Capital for energy | Energy | %99.2 | %99.2 | 0.8% | Subsidiary |
Energy | Egypt | O Capital for services and construction | Energy | %99.2 | %99.2 | 0.8% | Subsidiary |
Media and Technology | Egypt | Orascom Telecom Venture co. "S.A.E" | Egypt | % 99,99 | % 99,99 | 0.01% | Subsidiary |
Other | Egypt | Orascom Pyramids Entertainment "S.A.E" | Egypt | 100% | 100% | 0.00% | Subsidiary |
Other | Egypt | Orascom prisme pyramids Entertainment "S.A.E" | Egypt | % 70 | 69% | 30% | Subsidiary |
GSM North Korea | North Korea | CHEO Technology JV Company | Telecommunication operator | 75.00% | 75.00% | 25.00% | Associate |
Financial Services | USA | Axes Holding | Information system for financial services | 33.9% | 23.7% | 66.1% | Associate |
Financial Services | Egypt | SARWA Capital | Micro Financing | 30% | 30% | 70% | Associate |
Financial Services | Egypt | Electronic Fund Administration Services | Mutual funds management services | 20% | 14% | 80% | Associate |
Financial Services | Egypt | International Fund Administration Services | Fund Admin Services | 20% | 14% | 80% | Associate |
Financial Services | Egypt | Misr Beltone Asset Management | Mutual funds management | 50% | 35% | 50.00% | Joint Venture |
APPENDIX B - LIABILITIES TO BANKS AND OTHER BORROWINGS AS OF DECEMBER 31, 2019
Local bank loan 59 40 99 EGP 4,710
Total OIH Loans 23,518 41 23,559 TWA Loans
Dec-20
Dec-21 Bank certificate rate of
return + 1.5% max 11% Secured Time Deposit
Future Current Liabilities and Fixed Assets (Except Land and Buildings)
Credit Facilities 16,056 - 16,056 EGP 440,000 Current Corridor +0.75% : 2% Unsecured
8%