FY 2013 Annual Report

Transcription

2013 Annual Report
Strongly Rooted
2013 Annual Report
Strongly Rooted
Contents
1. Five Strategic Initatives 2. Orascom Development at a Glance
3. Perfomance Overview. Business Segments 4. Countries 5. Corporate Governance 6. Investor Information
7. Consolidated Financial Statements 2013
Orascom Development HoldingAG 8. Financial Statements 2013
Orascom Development HoldingAG 9. Glossary of Terms 4
2.1 Company Profile
2.2 Destinations’ Map
2.3Letter to Shareholders
2.4 CFO’s Statement
3.1 Hotels
3.1.1 Indepth Interview-Orascom Hotels Management
3.2Real Estate and Construction
3.2.1Snapshot - Lustica bay, Montenegro
3.3Destination Management
3.4Other Segments
4.1Egypt
4.2 UAE
4.3 Jordan
4.4Oman
4.5 Switzerland
4.6 Morocco
4.7 Montenegro
4.8 United Kingdom
5.1 Group Structure and Significant Shareholders
5.2 Capital Structure
5.3 Board of Directors
5.4 Executive Management
5.5 Employees
5.6 Compensation, Shareholdings, and Loans
5.7 Shareholders’ Participation
5.8 Changes of control and defense measures
5.9 External Auditors
5.10 Information Policy
7.1 Consolidated statement of comprehensive income
7.2 Consolidated statement of financial position
7.3 Consolidated statement of changes in equity
7.4 Consolidated statement of cash flows
7.5Notes to the consolidated financial statements
8.1 Income statement
8.2 Statutory balance sheet
8.3 Statement of changes in equity
8.4 Cash flow statement
8.5Notes to the financial statements
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2013 Annual Report
4 Orascom Development
5
1. Five Strategic Initatives
1
3
4
Reduction of Cost Base
Capital Light Growth
Monetization
Implementing continuous cost savings through all areas of the group.
Strengthening relationships with strategic partners and investors.
• Cost savings target of CHF 50 million measured against FY 2012 cost base.
• CHF 38.5 million of annualized savings have been identified, which is on
track with our cost saving goal of CHF 50 million for FY 2014
• Debt reduction and restructuring, succeeded in waiving the financial
covenants for FY 2013 and reached preliminary agreements with
banks on rescheduling payments
• On 25 June 2013, Samih O. Sawiris became the new major
shareholder and Executive Chairman of ASA ( Andermatt
Swiss Alpes) with a 51% stake , Orascom Development remains
shareholder with a 49% stake. The transaction strengthened
Orascom Development’s balance sheet and released the Group
from further capex obligations, offsetting the majority of the existing
loans between the Group and Samih Sawiris (CHF 110.4 million)
• Omran, our partners in Oman, paid their capital increase portion
of CHF 6.6 million that was used to finance the Rotana hotel
construction
• Realize the value of our land bank, employing less capital from
our side
Divesting non-strategic assets and investments, utilizing the proceeds
to retire debt and to finance end of service payments in the various
destinations.
2
Optimization of Internal Processes
Streamlining the organizational structure, to realize synergies,
increase efficiency and transparency of our operations.
• Ongoing internal restructuring to increase efficiency and savings
• Established a new hotel asset management subsidiary under the name of
‘Orascom Hotels Management’ (OHM) to ensure effective & efficient
utilization of the company’s resources and hotel inventory
• Transformation of the old Swiss management holding into a more efficient
investment holding structure
• Right sized the construction activities of the group to better reflect internal
and external demand
• In the pipeline:
• Sale of Club Med Mauritius
• Sale of Tamweel
• As of FY 2013, CHF 62.5 million have already been realized
1 The Sale and Leaseback of El Gouna Power Plant; on 15 April 2013 ElGouna Electric Company, an Egyptian subsidiary of ODH, entered into a
sale and leaseback agreement with Nile Finance Company by selling the
former’s power plant to the latter for a total value of CHF 5.4 million
5
2 The Sale of Madinet Nasr Housing and Development (MNHD); on
22 July 2013, The Group sold its stake in MNHD keeping a minimal
investment of 500 shares. The exit transaction resulted in sales
proceeds of CHF 32.1 million
Selecting investments to tackle on the short term, others to keep
for the long term and identifying projects to divest.
3 The Sale of Romania (SOLE); during October 2013 the Group sold the
Sole project in Romania for total consideration of CHF 2.9 million to Mr.
Samih Sawiris
Focus on Core Activities
• Increase focus on core destinations, such as Egypt, Oman and
Montenegro
• Further investments to be strictly bound by secured financing
4 Drawdown of RAK TI1 loan for CHF 15.5 million, and Omran payment
of their capital increase portion for CHF 6.6 million: to finance the
construction of Rotana hotel in November 2013
1
5
RAK Tourism Investment FZC
• Reduce Cost Base
• Optimize Internal Processes
• Capital Light Growth
• Monetization
• Focus on Core Activities
2013 Annual Report
2. Orascom Development at a Glance
2.1 Company Profile
Orascom Development is a leading developer of fully integrated destinations, including hotels, private villas
and apartments, leisure facilities such as golf courses, marinas and supporting infrastructure. The Group’s
diversified portfolio of destinations is spread over multiple jurisdictions such as Egypt, UAE, Jordan, Oman,
Switzerland, Morocco, Montenegro & United Kingdom. Orascom Development has a dual listing:
a primary listing on the SIX Swiss Exchange; and a secondary listing on the EGX Egyptian Exchange.
1. land bank
4. Proven Business Model
• One of the largest and most diversified land banks
under the direct or indirect possession of Orascom
Development, by way of contractual rights or usufructs
with the option to acquire legal title
• Spread over eight jurisdictions, and is secured at a
relatively low cost
• The Key Value Driver for the medium and long-term
shareholders
• Securing land at nominal costs
• Controlling of the entire value chain from master planning and
construction to operation of a destination
• Continuous pre-sales to finance ongoing investments
• An integrated development and control concept, which allows
the Group to benefit at each level of the value chain
land bank of
More than
102.7
20
million m
2
years development
experience
Owner of
30
Hotels with
6,801
Operating
Destinations
1
8
rooms
2. Hotels Portfolio
•
•
•
•
Generate stable re-curring cash flow
16 self-managed and 14 under management
Most standards available (3 to 5 stars)
Management contracts with leading
international operators and local hotel chains
• 79% of our hotels in Egypt are certified with
Green Stars
• 46 awards during 2013
1
as of 31st December 2013
Committed Shareholders,
on board since listing
3. Loyal Shareholder Base
• Long-term shareholders owning 68.5% of the
outstanding shares, still on board since 2008
• A committed Chairman and a strong believer &
supporter of the company, injected CHF 149M since the
beginning of the crisis
• In 2013, Chairman extended his support and committed
to finance a cash deficit of up to CHF 60M until
December 2013 of which only CHF 40M was used
• In March 2014, Chairman renewed his commitment &
agreed to lend the Group up to CHF 115M until end of
April 2015
5. Fully Integrated Destinations Developer
•
•
•
•
Leading developer of integrated destinations, offering hotels, residential units, and luxury leisure facilities
Our destinations have the complete infrastructure of a self-sufficient town, offering international standard facilities
Supported by our know-how and market expertise, we created and continue to create new communities
Orascom has successfully created 8 operating towns in Egypt, UAE, Oman and Switzerland with other
destinations in different stages of development and planning in Morocco, Montenegro and United Kingdom
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2013 Annual Report
2.2 Destinations’ Map
Developing
Destination
Chbika
Operating
Destination
Andermatt Swiss Alps
Morocco
Destination in
the Pipeline
Eco-Bos
Switzerland
Oman
U.K.
102.7
million m2
total
LAND area
Jordan
16.0
million m2
Montenegro
completed
Area
Developing
Destination
Luštica Bay
16%
completed
Other Hotels
Tala Bay
U.A.E.
Egypt
Operating Destinations
El Gouna
Taba Heights
Haram City
Makadi
Developing Destinations
Fayoum
Qena Gardens
Amoun Island
Other Hotels
Royal Azur & Club Azur
Zahra Oberio
Operating Destinations
Jebel Sifah
Salalah Beach
Developing Destination
As Sodah Island
Destination in the Pipeline
City Walk, Muscat
Operating
Destination
The Cove
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2013 Annual Report
11
2.3 Letter to Shareholders
Dear Shareholders,
2013 has been another challenging year for Orascom Development
Holding AG. Although the year started out with an increase in
occupancy and revenue levels, the civilian unrest following the June
30th upheavals in Egypt, along with the ongoing political uncertainty,
has negatively impacted most of the Egyptian economic sectors
and particularly the tourism sector, the Group’s major sector of
operation. The imposed travel warnings, travel bans and severe airlift
cuts from major European feeder markets significantly impacted
our hotel operations, and the missing revenues kept delaying our
projects under development. Nevertheless, we achieved significant
progress in many areas: We added 147 new hotel rooms in Oman
and Switzerland to our diversified portfolio, managed to maintain the
average occupancy rate at 51% despite the turmoil, and increased
our real estate sales compared to last year. Furthermore we have
implemented a number of structural reforms, successfully executed
on our monetization schedule and launched a comprehensive
group-wide cost savings program.
Development of destinations progressing according to plan
Orascom Development’s destinations have developed according to
plan. In March 2013 I became the majority shareholder (51%) of our
Swiss subsidiary Andermatt Swiss Alps (ASA), and committed to invest
at least CHF 150 million into ASA to secure funding of the critical
size of the resort until 2017. Orascom Development, as an important
shareholder (49%), remains committed to the project and will benefit
from any future upside. In December 2013, after a construction
period of nearly four years, we celebrated the handover of The Chedi
Andermatt (105 rooms), a 5-star deluxe hotel, to the operator General
Hotel Management. The opening attracted a lot of regional and
international media attention and will help us to promote the destination
in Andermatt in the future.
In our flagship destination El Gouna on the Red Sea in Egypt we
completed the development of the Ancient Sands Resort, which offers
an 18-hole golf course and luxury real estate and also completed the
construction of the El Gouna cable park, the first complete water sports
complex in the Middle East.
In general real estate sales in El Gouna benefited from the safe haven
status of the destination and showed a pick-up in volume versus 2012.
The Makadi project near Hurghada is at an advanced stage. In February
2014, we opened a 4-star hotel with 287 rooms and managed to
maintain a good sales volume for real estate throughout the year. In
Oman, we secured the funding to finish the construction of the Rotana
Hotel (399 rooms) in Salalah Beach which was launched in March 2014. Our
project in Montenegro is progressing nicely with increasing sales volumes as
we started construction of the first ten apartment buildings together with our
partner Besix in June 2013. Additionally, plans are currently put in place to
start construction of the marina basin in 2014.
As highlighted last year, we will continue to focus on the advancement and funding
of our existing destinations, and we have no plans to add additional development
projects to our portfolio in the near future. We believe that our existing land bank
offers enough potential for organic growth for the next decade.
Optimization of internal structures
In 2013 we continued to optimize our internal structures, to realize synergies
and to increase the efficiency of our operations. One of the key focus areas
was the transformation of the old Swiss management holding into a leaner,
more efficient investment holding structure that is fully adapted to the current
economic and financial challenges. An important element of this initiative is to
strengthen the management capacity of the local subsidiaries and to improve
the quality of senior management. Furthermore we started to review and align
our Human Resources practices with Orascom Development’s strategy,
values and evolving needs, as well as to right-size the construction activities of
the Group to better reflect internal and external demand.
Shortly before the end of the year we announced the establishment of a joint
venture with Abdelhamid Abouyoussef under the name of ‘Orascom Hotels
Management’ (OHM) to asset manage the hotels of the Group. Abdelhamid
Abouyoussef is the owner and managing director of 1,600 hotel rooms
throughout Egypt, and we trust in his expertise to further strengthen the hotel
segment’s capacity and performance.
Changes in the Board of Directors and Executive Management
At the fifth Annual General Meeting on May 13, 2013 all members of the Board
of Directors, with the exception of Luciano Gabriel, stood for re-election and
were confirmed in their office for a further year. In addition, Eskandar Tooma
and Marco Sieber were elected as new members of the Board of Directors for
a one year period. Subsequent to the 2013 Annual General Meeting Nicolas
Cournoyer decided to step down from the Board, effective October 1, 2013.
Further to the changes in the Board of Directors, we saw two changes in the
Executive Management. Raymond Cron, COO, decided to leave Orascom
Development effective July 1, 2013 to pursue career opportunities outside the
Group. Secondly, Eskandar Tooma was appointed ad-interim CFO effective
September 1, 2013, following the decision of Ahmed El Shamy, who joined the
Group in 2012, to resign due to health reasons.
After the balance sheet date and effective March 1, 2014 I took over the
responsibilities of the Group CEO from Gerhard Niesslein on an ad-interim
basis. This change was a joint decision between the Board of Directors and
Mr. Niesslein. Furthermore, effective March 1, 2014 Abdelhamid Abouyoussef
took over the responsibilities of Mahmoud Zuaiter (Ex-CEO of International
Hotels Holding and former Group CFO) as Chief Hotels Officer and became
a member of the Executive Management team. On April 14, 2014, the Board of
Directors endorsed a new organizational structure for Orascom Development
that better reflects the current business needs and supports the restructuring of
the Group. The newly assembled five-headed Executive Management team will
continue to be led by the Chief Executive Officer (CEO) and will further consist
of the Chief Financial Officer (CFO), Chief Hotels Officer, Chief Real Estate &
Development Officer as well as Chief Human Resources Officer.
Outlook for 2014
Egypt continues to be in a political transition phase and overall visibility
remains low. Nevertheless, I am convinced that the current efforts exerted
by the government to restore economic growth, the acceptance of the new
constitution as well as the expected parliamentary and presidential elections
in early 2014 are a step into the right direction, and will help to restore
confidence that the country can return to normality and safety after the unrest.
Additionally, Egypt will remain a hub for foreign investments, as long as its
economic fundamentals are largely intact: the country’s attractive location at
the crossroads between Europe, the Middle East and Africa as well as the fact
that Egypt is one of the Arab World’s most diversified economies.
Should the political and economic situation continue to stabilize, I strongly
believe that the Group is fundamentally well positioned, with a solid portfolio
of hotels and real estate infrastructure as well as cost savings and monetization
programs on track, to quickly recover from this down-cycle and to return to
earlier positive operational levels. I remain committed to the Group and will
finance a potential cash deficit of up to CHF 115 million until end of April 2015
in a worst case scenario.
Thank you for the trust you have placed in us.
Samih O. Sawiris
Chairman of the Board of Directors and Chief Executive Officer
2013 Annual Report
13
2.4 CFO’s Statement
Dear Shareholders,
The ongoing challenging environment caused mainly by the political instability in Egypt
continued to affect the Group’s performance especially in the second half of 2013, post
the 30th of June turn of events. As a result, consolidated revenues decreased by 18.5%
to CHF 221.4 million compared to CHF 271.8 million last year. The hotel segment’s
revenues were significantly impacted by travel bans imposed by several European
countries, and hence declined to CHF 125.8 million compared to CHF 147.6 million last
year. However and despite the ongoing challenges in the Egyptian tourism sector, the
hotel segment was able to achieve a positive EBITDA of CHF 19.6 million compared to
CHF 38.9 million in the comparable period. After adjusting for non-cash items including
foreign exchange losses, provisions and impairments the segment was able to generate an
adjusted EBITDA1 of CHF 25.7 million compared to CHF 42.7 million in 2012. Hotels that
are directly managed by the Group made the most positive contribution.
Operating Cash flow after interest and taxes reached CHF (52.2) million,
loss was mainly due to the decrease in collection of real estate receivables,
along with lower hotel performance and inventory build-up in Switzerland
(only during 1H 2013 as it was deconsolidated after),Egypt and Oman.
In the real estate segment we were able to increase contracted sales by 17.4% over the
same period last year to reach CHF 72.8 million. This increase mainly came from El
Gouna, where we succeeded in selling off 43% of its inventory. On the other hand, the
segment’s revenues witnessed a decrease of 34.8% due to less deliveries accompanied
by less construction activities in Egypt and Oman.
Preserving our balance sheet and monitoring liquidity was another key focus
area for 2013. The ASA transaction and the subsequent deconsolidation of
ASA during the first half of 2013 significantly strengthened our balance sheet,
as the chairman’s loans to Orascom Development were converted into equity
of ASA. Our net debt position improved from CHF 502.2 million as per yearend 2012 to CHF 398.91 million as of December 31, 2013. We also succeeded
in waiving the financial covenants for the financial year 2013 and reached a
preliminary agreement to convert some of our non-collateralized short-term
loans into medium-term loans. These actions have taken away a lot of short term
pressure, but in order to put the Group on a financially sound basis, we need
to continue to improve our free cash flow generation by reducing overheads,
accelerating real estate collection, and minimizing Capex spending. In parallel,
we will also continue pursuing our montetization and cost saving intiatives with
proceeds of which to be used in retiring our outstanding debt repayements and
end of service settlements.
In addition to the reduced turnover, the group’s bottom line results were impacted by high
overhead costs, lower capitalization of financing costs resulting from reduced construction
activities and the devaluation of the Egyptian Pound. Furthermore, one-off items including
provisions, impairment of investments and a reassessment of the recoverability of deferred tax
assets have also significantly contributed to the net loss from continuing operations.
80
60
53.6
40.6
40
28.0
20
7.0
16.7
13.5
10.5
0
(9.5)
(9.7)
-20
4.0
(1.3)
(4.5)
-40
(49.1)
-60
-80
-100
-120
-140
-160
(157.8)
-180
-200
Reported Net Loss from
Deferred D&A Provisions & FX
Capitalized Share in
Fair value Cash Interest Current Adj.
Net loss2 Loss 3 discontinued tax losses
Impairments losses financing
associates differences loss expenses taxes EBITDA
operations
costs
As indicated in the chart above, 68.9% of the reported net losses are non cash
(FY 2012: 50.8%)
1
Adjusted EBITDA: Earnings before Interest, Taxes, Depreciation and Amortization adjusted to better reflect optimization of core
operating activities net of any extraordinary items such as provisions & impairments FOREX losses, capitalized G&A expenses, share
in associates and fair value differences
2
Net loss after minorities
3
Net loss to non controlling interests
While the operating cash flow was weaker than in 2012, our efforts to rationalize
capex spending and to cut costs showed first tangible results. We were still able
to achieve more than what was budgeted in terms of cash, considering that we
did not materialize all our planned monetization items for the year and we only
used CHF 40 million out of the CHF 60 million amount of funding that was
committed by the chairman during 2013.
Balance sheet strengthened
In our base case scenario for 2014 and considering the current political instability
in Egypt, we are expecting a cash deficit of about CHF 30 million before
monetization proceeds. Should the political and economic situation stabilize after
the preseidential and parlimentary elections, we believe we will be able to witness
better operational performance and accoridnlgy achieve better results. Once
again, the Chairman is extending his support to the Group and has committed
to finance a potential cash deficit of up to CHF 115 until end of April 2015 in
a worst case scenario. This strong financial commitment provides Orascom
Development with the flexibility to smoothly adjust to the changed operating
environment and still be able to realize business opportunities as they arise.
hotel in Oman in November. The transaction proceeds were largely used to retire
outstanding debt, finance end-of-service payments and finance new hotels. As
communicated earlier we are still pursuing the sale of our Egyptian mortgage
subsidiary Tamweel and of our stake in the Club Med Hotel in Mauritius
(CMAR). Negotiations with interested parties have been started. Overall we
are confident that the monetization schedule will contribute to a more efficient
allocation of capital resources across the Group and will help to re-focus
management capacity on our core activities in Egypt, Oman and Montenegro.
Comprehensive cost savings program shows first visible results
In order to reduce the significant cost overhang that has been built-up following
the Arab Spring in 2011, Orascom Development has launched a group-wide cost
savings program in July 2013 to reduce the cost base by CHF 50 million until the
end of 2014. So far cost savings initiatives with a full annualized potential of more
than CHF 38.5 million have been identified in 2014 budget and partly already
been implemented. Since December 2012 we have reduced our headcount, the
largest single cost item, by more than 2,400 employees, equivalent to 17% of
the overall workforce. These lay-offs were partly associated with non-recurring
end-of-service charges that impacted our 2013 financial result. While this is a
step into the right direction, we clearly need to do more, and we remain firmly
committed to the initially communicated CHF 50 million cost savings target. That
said, we acknowledge that further headcount reductions are unavoidable, but
considering our status as one of the major employers in Egypt, we will continue to
evaluate options to make this as socially acceptable as possible.
Outlook for 2014
Four core pillars will be our main focus during 2014; we will continue to work on
our cost savings initiative by achieving the CHF 38.5 million of savings identified
in our budget and also work on divesting cost-intensive investments. We will
continue to strengthen our balance sheet, with a prime focus on debt reduction and
restructuring. Accordingly, we will continue with our monetization plans, using the
proceeds of which to retire our outstanding debt, with a target to reduce the total
debt by CHF 100 million. We will also exert extra efforts in continuing to reschedule
some of our short-term maturing debt to medium-term maturities. Focusing on our
core activities, we are already developing and adapting new strategies and initiatives
aiming to boost revenues from our ongoing operations from the hotels and real
estate segments. We will also focus on quick value-adding investments with full
optimization of capex-spending.
Successful execution on monetization plan and increased focus on
core activities
In 2013 we have successfully realized CHF 62.5 million from our monetization
program. Key highlights were the sale and lease back of the El Gouna power plant
in April, the share sale of Madinet Nasr for Housing and Development (MNHD)
in July, the sale of our Romania project in October and the financing of the Rotana
1
Includes borrowings and cash from disposal group
Eskandar Tooma
Chief Financial Officer
2013 Annual Report
3. Perfomance Overview: Business Segments 4
Segments
• Hotels
• Real Estate & Construction
• Destination Management
• Other Segments
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2013 Annual Report
17
3. Business Segments
3.1 Hotels
While 2013 started with an increase on occupancy and revenue levels,
the political turmoil and severe decline in airlift to Egypt during the third
and fourth quarters resulted in 12% decline in occupancy levels over
the same period last year with revenues standing at CHF 125.8 million.
Hotel market in 2013
Driven by higher market presence and better understanding of the consumer
needs, 2013 started with notable performance growth. During 1H 2013,
occupancy levels increased to 59% as opposed to 54% (1H 2012), and total
revenues per available rooms (TRevPar) reached CHF 60 compared to CHF
57 (1H 2012). On June 30th, the civilian unrest and the subsequent events
led to the declaration of a state of emergency and the imposition of a night
time curfew again pushing several countries to issue travel bans on Egypt with
severe airlift cuts from major European feeder markets, instigating a general
decline in tourism rates. Nonetheless, we have managed to maintain the
Group’s hotel occupancy rates at 51% compared to 57% last year.
Financial review 2013
Hotel’s total revenue witnessed a 14.7% decline from last year to reach CHF
125.8 million compared to CHF 147.6 million in FY 2012. This was mainly
driven by lower occupancy rates in all our hotels in Egypt. As of FY 2013, our
hotel room capacity increased by 1% from 6,654 rooms to 6,696 rooms due
to the addition of 18 new rooms in Juweira Boutique Hotel in Salalah Beach,
Oman and 24 new rooms in Sifawy Boutique Hotel in Jebel Sifah, Oman .We
also celebrated the opening of The Chedi in Andermatt Swiss Alps (105 rooms)
in December, of which we are now a minority shareholder holding a 49% stake.
The Group increased its share of self-managed hotels, in contrast to the share of
international hotel chains, whereas out of the 29 total consolidated operational
hotels as of FY 2013, Orascom Development is directly managing 16 hotels.
Despite the ongoing challenges that tourism sector in Egypt is confronting,
the Hotel’s segment was able to achieve a positive EBITDA of CHF 19.6
million compared to CHF 38.9 million last year and after adjusting for noncash items including FOREX losses, provisions and impairments the segment
was able to achieve an adjusted EBITDA of CHF 25.7 million compared to
CHF 42.7 million last year.
Our key source markets remained to be West Europe (Germany, Switzerland,
Benelux, and France). Hammering on El Gouna’s local market presence in
2012, Egyptians continued to be our number one guests and also became
our biggest clients in terms of room nights. In Oman, Sifawy Boutique Hotel
started a gradual market growth to become Oman’s prime meetings &
incentives destination.
Country and Destination Performance
El Gouna became Egypt’s high-end Wedding Destination. Supported by
a secluded location away from the larger urban cities, strict security systems,
luxury hospitality standards and wide selection of activities, the town remains
to be a travel attraction to European holidaymakers.
Share of Group revenue
Hotel revenues
Taba Heights, Egypt was negatively affected by the travel warnings and
reduced flight capacities from the major European countries to Sinai. As
a counteraction, the town was introduced as the regions only Luxury-AllInclusive Destination as part of the hotel’s deal with FTI Touristic GmbH (a
leading German-based tour operator) where the latter initiated a charter
capacity of 1,280 weakly seats covering Austria, Germany and Switzerland.
CHF 125.8m
(2012: CHF 147.5m )
56.8%
13
12
(2012: 54.3%)
Adjusted EBITDA
In UAE, The Cove continued its stellar performance maintaining its
occupancy rates of 81% and average room rates CHF 160.
Marina Plaza, Tala Bay in Jordan witnessed an improvement, where in
FY 2013 total revenues increased by 14.8% over last year as a result of an
increase in occupancy rates reaching 54% compared to 44% during FY
2012. This increase was accompanied by a 15% increase in TRevPar reaching
CHF 50 compared to CHF 44 during FY 2012.
CHF 25.7 million
13
(2012: CHF 42.7 million)
12
4
In Oman, Juweira Boutique hotel FY 2013’s occupancy was 50% compared
to 38% last year; noting that 2013 was the hotel’s first full operational year
where we also added 18 new rooms to reach 82 operational guestrooms.
Whereas, Sifawy Boutique hotel FY 2013’s occupancy rate declined to 31%
compared to 33% last year.
4
3
Outlook for 2014
Starting with a bit of a challenge post the airlift cuts, the first two months of the
current business year witnessed a decrease in total revenues.
Nevertheless, during ITB 2014 we succeeded in reinforcing strategic
partnerships with major tour operators, thus enriching the market mix to cater
to a wider and a more niche bracket of clientele. This is expected to reflect
positively on the occupancy thereafter. As soon as the political situation in
Egypt stabilizes along with the increase in rooms capacity post the opening
of the five-star Rotana Salalah in Oman (March 2014:399 rooms), Makadi
Garden Hotel in Egypt (February 2014: 287 rooms) and the prospected
opening of Ancient Sands Hotel in Egypt (July 2014: 114 rooms), 2014 should
end with satisfactory results in terms of Net Profits.
3
3 3
19
5
Egypt
22
Revenues by
Countries
(% total)
6
UAE
Jordan
Nationality of
hotel guests
(% total)
7
Oman
Orascom Hotels Management
In November 2013, Orascom Hotels Management (OHM) was launched
as the hotel asset management subsidiary of Orascom Development. Set to
optimize the hotel sector’s profitability capacities, OHM will be overlooking
the Group’s entire hotel portfolio encompassing 34 hotels and more than
8,000 guestrooms dispersed across Egypt, Jordan, Oman, UAE and, lately,
Switzerland. The new subsidiary is established as a joint venture between
Orascom Development (75%) and Abdelhamid Abouyoussef (25%), a
tourism specialized entrepreneur and owner and managing director of 1,600
hotel rooms spread across Egypt; where the latter is heading the new entity in
endeavors to enhance performance and increase efficiency of the hotels’ sector.
13
12
21
9
70
10
Egypt
Jordan
Germany
Israel
France
Oman
Russia
UAE
Belgium
Netherlands
UK- England
Others
10
The Hotels segment KPIs, as of 31 December 2013
Number of Hotel
Rooms
Country
Destination
Egypt
El Gouna
Taba Heights
Others Red Sea
Floating Hotels
2
ARR
(CHF)1
TRevPAR
(CHF)2
FY 2013
FY 2012
FY 2013
FY 2012
FY 2013
FY 2012
FY 2013
2,707
2٫707
63%
55%
54
52
59
47
2,365
2٫365
47%
43%
53
44
48
37
830
830
63%
52%
30
26
40
29
27
27
15%
8%
625
674
132
70
FY 2012
UAE
The Cove
346
346
81%
81%
161
160
215
217
Jordan
Tala Bay
260
260
44%
54%
64
60
44
50
Oman
Jebel Sifah
55
79
33%
31%
113
116
76
82
Salalah Beach
64
82
39%
50%
126
113
74
95
6,654
6٫696
57%
51%
60
57
61
51
ODH Group
1
Occupancy rate (%)
ARR: Average Room Rate
TRevPAR: Total Revenue Per Available Room is similar to RevPAR but also takes into account other room revenues e.g. food and beverage, entertainment, laundry and other services.
2013 Annual Report
19
3.1 Hotels
3.1.1 In-depth Interview with the Managing Partner of Orascom Hotels Management
Orascom Hotels Management
Overlooking the Group’s entire hotel portfolio, encompassing 34 hotels and more than 8,000 hotel rooms, and in line
with the company’s strategy of optimizing internal processes, enhancing performance and increasing efficiency, Orascom
Development established a joint venture between Orascom Development (75%) and Abdelhamid Abouyoussef (25%),
under the name of “Orascom Hotels Management” (OHM), to manage the entire Group’s asset of hotels, and hence
optimize the hotel sector’s profitability capacities. Abdelhamid Abouyoussef, a tourism specialized entrepreneur and
owner and managing director of 1,600 hotel rooms across Egypt, is heading the new entity as the Managing Partner of
OHM with the aim to enhance performance and increase efficiency of the hotels’ sector.
ABDELHAMID M. ABOUYOUSSEF *
Eng. Abouyoussef started his career in design and
installation of hotel electro-mechanical systems in 1998. He
soon moved to project management in hotel construction,
in addition to being the owner’s representative at Amphoras
Holiday Inn, Sharm El Sheikh. In 2004, Abouyoussef
founded his first company, Shores Hotels, to manage a
200 room hotel in Sharm El Sheikh. Within two years,
Shores Hotels grew to manage 3 hotels with a total
capacity of 1,000 rooms. In 2008, Abouyoussef started
developing 600 rooms in three new destinations across
Egypt. Later that year, he founded a travel agency, today
handling over 100,000 tourists per year. Abouyoussef
received his B.S. in Mechanical Engineering from the
American University in Cairo and a Masters of Science
degree from the University of California at Berkeley. He is
also a commission member of the International Federation
of the Automobile (FIA).
* Effective March 1,2014, Abdelhamid Abouyoussef took over the responsibilities of Mahmoud
Zuaiter (EX- CEO of International Hotels Holding) as Chief Hotels Officer and become a
member of the Executive Management Team.
1 Why the JV with Orascom Development Holding?
This joint venture was driven by a mutual aim for high return on investment.
Orascom Development’s investment fundamentals, hotel portfolio and
market presence promise a healthy and steady growth. Furthermore, our
joint venture facilitated the Group’s becoming one of the biggest hotel
owners and operators in the region. Such an inventory, coupled with
a strong specialized hotel sector, makes opportunity for growth more
evident and achievable.
2 Please shed some light on the new Hotel strategy that you
have been adapting and its achievements so far.
Our strategy and mission is to develop an efficient, stable and transparent
financial and operational setup of the Group’s Hotel sector. The business
model was revisited to include units like “Performance Optimization”,
aiming at steady monitoring and timely action. Partnerships with tour
operators or hotel management companies were reassessed to ensure
rewarding and stable returns to all parties. The market and guest mix is
being broadened to include clientele that have proved higher loyalty and
less sensitivity to political instabilities.
On the operational level, we are refurbishing the hardcore and softcore hospitality amenities to boost our guest satisfaction and market
positioning. An efficient Central Reservation Unit, handling an average
of 100 requests a day, and a recently announced rich calendar of events,
featuring high-end lifestyle and sports events, were among our early
happenings on that end.
3 What is your view currently on the tourism sector in Egypt
and when do you think we will be able to witness some sound
recovery?
The social and political atmosphere that is expected with the upcoming
presidential elections promises good pick-up of tourism. This has already
encouraged some of Europe’s major tour operators, starting by the second
quarter of 2014, to inject more business to Egypt in general, and the Red
Sea in particular. To take a market lead and secure quick results, we are
adopting a proactive sales approach, and thus working very closely with
the major tour operators on committing medium to long term alliances.
4 How do you foresee Orascom Development’s Hotel’s sector
performance in 2014?
The unprecedented events that took place in Egypt during 1Q 2014 and
the resulting travel bans have impacted our occupancy rates & TRevPar.
As soon as the political situation in Egypt stabilizes, net profit figures would
definitely mark a notable growth over the course of 2014
2013 Annual Report
21
3.2 Real Estate and Construction
Real Estate & Construction segment achieved a noticeable
increase in contracted sales in 2013, while the segment result
was affected by high overhead cost against lower revenues.
Real Estate and Construction market in 2013
During the first half of the year, the country was facing different incidents of
social & economic unrest which in turn negatively affected international and
local demand on the second homes market in Egypt. This situation started
to reverse during the second half of the year, with encouraging signs of
improvements on both the political and social fronts bringing back some
positive investor appetite and consequently increasing the demand on realestate. We took advantage of this positive change and redesigned our sales
propositions to meet with the new market expectations. We also introduced
new products in prime locations and continued to retain our customers who
wanted to return their earlier purchased units by shifting them towards lower
priced units. In El Gouna, value of contracted units increased by 79.3% over
the same period last year. We were able to successfully sell most of our
inventory, with the share of local buyers accounting for 98% of the total sales.
In Oman, value of contracted sales were 34.1% less than last year resulting
from a shift in our sales strategy, whereas focus during the year was on selling
the built-up inventory over a 2 years payment term, pulling back on off-plan
sales. There was positive demand in our European destinations, especially in
Montenegro with contracted sales witnessing an increase of 24.1% over the
same period last year.
In terms of construction in Egypt; we completed the construction and delivery
of the first-phase units in Ancient sands, El Gouna and have also completed
the construction of its planned golf course. The construction of El Gouna
Cable Park was completed creating a comprehensive water sports complex
in addition to finishing the construction of Makadi Hotel Gardens Azur in
Makadi, with 287 guest rooms that was opened in February 2014. In Salalah
Beach, Oman, we finished the construction of Rotana Hotel, a five-star hotel
with 399 guestrooms that was also opened in March 2014. We also completed
the construction of “Lake Block”, an expansion of our Juweira Boutique Hotel
that includes 18 hotel-apartment units that are already operational, developed
8km of lagoons and handed over 46 real estate units. While as in Jebel Sifah,
Oman we handed over 32 real estate units. In Montenegro we are finishing up
the construction of 71 apartments in 10 buildings.
During 2013, Orascom Development sold 580 real estate units for an amount
of CHF 72.8 million compared to 704 units for CHF 62.0 million a year ago
(this excludes sales coming from Andermatt, Switzerland). The increase of
17.4% in terms of value mainly came from the increased sales coming from
El Gouna, where we succeeded in selling off the majority of the inventory
through the development of attractive sales packages, focusing on incentives
for early settlement, and also by providing flexible financing programs to the
buyers. Montenegro also was among the main contributors in our total sale
volumes where we successfully sold 48 new units compared to 43 a year
ago. The increased sales appetite in Montenegro came as a result of the
finishing up of the construction works for 71 apartments in 10 buildings, where
clients started to witness the first signs of life in the developing destination.
It is also worth mentioning that the Group succeeded in decreasing the
value of canceled units for all its destinations during the year by almost 50%
compared to last year.
We further achieved to reduce the number of real estate units which are either
built or under construction from CHF 55.3 million in 2012 to around CHF
47.3 million in 2013, mainly as a result of the efforts exerted with the sale of
inventory in El Gouna.
2013 revenues decreased by 34.8% from CHF 76.4 million to CHF 49.8
million. The decrease is mainly due to lower deliveries in Makadi and Oman in
addition to lower sales and deliveries of our budget housing project. Several
items impacted our operating results; fixed overhead costs, lower revenues
and gross profit margins associated with deliveries in Oman, in addition to
higher provisions incurred for doubtful receivables in Egypt. Accordingly the
segment’s adjusted EBITDA reached CHF 3.1 million when compared to
CHF 9.5 million in 2012.
Outlook for 2014
2014 will still be a challenging year for the Real Estate segment, especially in
Egypt. Although we are expecting some stability on the political front with the
presidential and parliamentary elections, nevertheless investor’s confidence
will gradually pick up only when actual results are evident. Now that we have
sold most of our inventory in El Gouna, we will be designing new attractive
sales packages with more flexible payment terms and tighter delivery
schedules to encourage and attract a wider client base. We also expect a
positive impact on sales in Makadi from the launch of Makadi Hotel Gardens
Azur (287 Guestrooms) that took place in February 2014.
In Montenegro, for Luštica Bay we will continue with our ongoing construction
works to completely finish the 71 apartments for the ten residential buildings
and start the construction of the marina. We will also develop enhanced
marketing strategies to ultimately increase our sales volumes.
In Oman, our focus will be on offloading our existing inventory, we might
revisit opening the off-plan sales again during the third quarter of the year
and we are planning to deliver 85 real estate units. In terms of construction,
in Jebel Sifah, we will resume the construction works of the first 3 holes of the
golf course that we started during 2013 and in Salalah beach, we will start the
construction of the Club Med Hotel with 399 planned rooms and we will
resume the construction works in As Sodah Island.
Real Estate and Construction revenues
CHF 49.8m
22.5%
(2012: CHF 76.4m )
13
12
13
12
(2012: 28.1%)
Adjusted EBITDA
CHF 3.1m
13
(2012: CHF 9.5)
12
2%
19.1
Value of
contracted
sales (CHF m)
Egypt
44.3
Oman
Montenegro
3%
2%
Contracted
Sales by Buyer
Nationality
(% total)
87%
9.4
Egyptian
Swiss
Omani
Dutch
Russian
French
Belgian
Syrbia
British
Montenegro
Sweedesh
Others
The Real Estate and Construction segment KPIs, as of 31 December 2013
Value of contracted
units (CHF m)
Country
Destination
Egypt
El Gouna
Average Selling Price
(CHF/sqm)
Number of contracted
units
2012
2013
2012
2013
2012
2013
19.4
34.9
2,308
2,536
61
82
Fayoum
-
0.1
-
285
-
1
Makadi
2.3
2.2
621
595
54
52
Haram City
10.2
7.1
319
305
520
376
Oman
Jebel Sifah
10.5
5.7
2,473
2,412
15
12
Salalah Beach
3.7
3.7
2,044
2,426
8
9
UAE
The Cove
0.2
-
1,610
-
1
-
Montenegro
Lustica Bay
15.4
19.1
4,103
4,335
43
48
Morocco
Chbika
0.2
-
1,503
-
2
-
ODH Total
62.0
72.8
1,109
1,452
704
580
ODH (excl. Budget Housing)
51.8
65.7
2,336
2,519
184
204
2013 Annual Report
23
2013 Annual Report 93
2013 Annual Report
“Luštica Bay is the home of active living and
a healthy lifestyle on the Adriatic coast”
We are creating a real, welcoming community…
… a community that embraces sport and wellbeing.
We will breathe new life into the Adriatic coast, be
welcomed by locals and international visitors alike,
and set the benchmark for sensitively developed
coastal resorts with a focus on the active lifestyle.
From village style apartments, to hillside townhomes and
exclusive private villas, the residences at Luštica Bay will be
diverse in location, design style and function. All residences are
designed to fit seamlessly within the natural setting and have
convenient access to the resort’s transportation systems, shops
and restaurants, beaches and marinas.
A total of eight hotels are planned for the Luštica Bay development,
from international five star brands to charming boutique hotels.
From the seafront exclusivity of the southern peninsula, to an
upper mountain golf experience and unique town units, Luštica
Bay will offer a full spectrum of world-class accommodations.
Designed like the traditional fishing towns, Luštica Bay’s marina
and adjacent marina town will be the heart and soul of the
development – a bustling pedestrianised village by the sea
enjoying cafes, bars, boutiques and gourmet dining, plus three
nearby hotels offering boutique, marina-front and beachfront
accommodation and spectacular views across the bay.
Seaside golf. Par excellence created by internationally renowned
golf course designer Gary Player, it will feature Montenegro’s
first 18-hole signature golf course. The site now witnesses a
lively driving range and bar offering magnificent views, with golf
lessons and tournaments, archery and cocktails for pros and
amateurs alike.
94
2013 Annual Report
2013 Annual Report 96
Sustainability
Luštica Development AD
is committed to creating
and operating a sustainable
integrated resort, where
economic, ecologic and social
aspects are included in every
decision making process.
With a long-term approach to
business operations based on the
principles of sustainability, we
set to bring the greatest positive
impact to the economy and leave
the smallest footprint on the land.
6.9 million m2 of which only 6% will be built ensuring that the Lustica
Peninsula retains the majority of its natural wealth.
•The first certified eco-labeled development in Montenegro
•The first LEED for Homes project in Europe
•A low energy concept. The buildings at Luštica Bay will consume less than
a third of today’s average Montenegrin building’s energy consumption
•Introduction of a lake for thermal storage and irrigation water storage
•Reduction of the private car use with access restrictions, centralized
visitor parking, use of low emission vehicles, good public transportation,
cable car access to the marina village.
• Luštica Bay is working with the Marine Institute to create a protected
marine area in Trašte Bay, while simultaneously enhancing the sea
environment with artificial reefs and the construction of a board walk
nearly 5 km in length.
2013 Annual Report
97
2013 Annual Report
98
24
2013 Annual Report
Orascom Development
3.3 Destination Management
The Segment reports a slight decrease in revenues compared
to last year.
Outlook for 2014
We will continue to strengthen our brand awareness and ensure that guests/
residents experience our “life as it should be” vision in our destinations.
Destination Management environment in 2013
Despite the ongoing political challenges that Egypt has been passing through
during the year, El Gouna continued to perform positively holding several
events encouraging real estate owners to use their properties more frequently.
The rising awareness that El Gouna has high level of security standards,
stimulated demand especially on the local level, where a lot of Egyptians
chose to select El Gouna as their destination of choice during the national
holidays. In El Adha feast, the number of visitors was estimated to be around
30,000 visitors, the highest number in the history of El Gouna.
In addition to the importance of maintaining a world class standard of
infrastructure, security, landscape and maintenance; we are moving forward
in promoting El Gouna as a sports destination with special concentration on
water sports, racing, bikes, squash and football. This gives a new dimension to
El Gouna and helps attract new channels and markets.
Revenues in Orascom Development’s segment Destination Management
slightly decreased to CHF 14.6 million in 2013 (2012: CHF 16.5 million).
Around 60% of revenues were generated from utility functions such as
water or electricity generation, while the remaining 40% were derived from
commercial, urban and community services as well as infrastructure and
maintenance activities. The segment reported adjusted EBITDA losses of
CHF 0.6 million in 2013 compared to a loss of CHF 1.2 million in 2012.
Key events
In El Gouna, we completed the construction of El Gouna Cable Park, a huge
water sports complex with two spacious cables, conforming to Olympic
standards. In January 2014, we signed a new agreement with Budget
Transportation to be responsible for all transportation services within El
Gouna. A Carbon Neutral Protocol has been signed by the attendance of her
Excellency Dr. Laila Eskandar; the Minister of Environment and the Chairman
of the Group to turn El Gouna into the first Carbon Neutral City in the world.
In December of 2013, Orascom Development took over the management of
the Hotel Club Paradisio, which was managed earlier by Club Med.
Orascom Development also took over the management of El Wekala Golf
resort in Taba Heights, which was previously managed by Three Corners.
Also In the beginning of 2013, the Group started the development plan of the
International Tourist Marina to increase number of passengers by constructing
two luxuries-hall buildings including an arrival hall & a departure hall that
are fully equipped and furnished by all required tools and equipment. We
also finished the construction of Sands managed Casino in Miramar Hotel
that is planned to open during 2014 as the destination’s first gaming center
promising a new entertainment edge to the town.
In Oman, we have started the rough shaping of 3 holes for the golf course
in Jebel Sifah, we opened 5 new shops in the Marina Town and we held a
number of festivals and events including the Dubai-Muscat Sailing competition
and have completed the Marina fuel-station that should be operational during
Q2 2014. In Salalah beach, we finished the construction of the Rotana fivestars Hotel with 399 rooms which was launched in March 2014. And we
also opened 3 new shops in Marina Town, in addition to our now-famous as
Sammak restaurant operated by Juweria Hotel.
For Oman, we will continue working on the positioning of Jebel Sifah as a
natural picturesque getaway offering an adventurous experience; working
on its infrastructure, roads and landscape going full speed to shape up the
destination. In Salalah Beach, with the recent opening of the Rotana five-stars
Hotel featuring 399 guest rooms, we are expecting a big boost to the number
of guests and visitors to the destination and accordingly we will be opening
different facilities and amenities to include restaurants, bars and pharmacies to
better serve the destination.
Destination Management revenues
CHF 14.6m
13
12
(2012: CHF 16.5m )
6.6%
13
12
(2012: 7.4%)
Adjusted EBITDA
CHF 0.6m
13
(2012: CHF 1.2m)
12
1%
8%
12%
10%
5%
Destination
Management
Revenues by
Destination
(% total)
El Gouna
Utilities
18%
Haram City
73%
Taba
The Cove
12%
Destination
Management
Revenues by
Service Type
(% total)
Commercial Services
60%
Infrastructure & Maintenance
Urban Services
Others
25
2013 Annual Report
27
3.4 Other Segments
Land Sales
Other operations
Occasionally, the Group sells land where there are no development obligations or where the Group has developed infrastructure in order to sell the land to
third-party developers. This establishes a reference point for the market price of our land bank. Revenues from such sales are included in our Land Sales segment.
The segment Other operations combines those businesses of Orascom Development that are not classified in any of the other business segments. The
segment includes activities such as mortgage financing, rental of villas and apartments, hospital and educational services, marina, limousine rentals, laundry
and other services.
Revenues from the sale of land, sale of land rights and the associated costs are recognized when land is delivered and the risk of ownership and control has been
transferred to the buyer.
During 2013, we achieved CHF 0.9 million revenues from land sales compared to CHF 0 million last year, mainly due to land revenue recognition resulting from
the sales of real estate units in Ancient Sands, El Gouna .
Other operations revenue
Land Sales revenue
CHF 0.9m
(2012: CHF 0.0m )
13
CHF 30.3m
13
12
(2012: CHF 31.4m )
12
0.4%
(2012: 0.0%)
13
12
(2012: CHF (2.4)m)
13.7%
13
(2012: 11.6%)
12
Adjusted EBITDA
Adjusted EBITDA
CHF 0.6m
During 2013, revenues of the segment Other operations decreased by 3.5% from CHF 31.4 million to CHF 30.3 million, in particular due to the devaluation of
the Egyptian pound against the Swiss Franc; as the majority of the revenues from this segment are in Egyptian Pounds.
13
12
CHF 13.6m
13
(2012: CHF 12.4m)
12
4. Countries
8
• Egypt
• Switzerland
• UAE
• Morocco
• Jordan
• Montenegro
• Oman
• United Kingdom
31
2013 Annual Report
4. Countries
Key Facts
Egypt
UAE
Jordan
Oman
Switzerland
Morocco
Montenegro
UK
8
Countries of
Presence
30
Operating
Hotels
8
Operating
Towns
Orascom Development
6,801
Hotel Rooms
currently operating
102.7
million m2
Total Land
Bank
1 Nile cruise ship
29 hotels which are either selfmanaged or under international
and local hotel management,
with 6,801 hotel rooms currently
operating
El Gouna, Egypt
Taba Heights, Egypt
Haram City, Egypt
Makadi, Egypt
Jebel Sifah & Salalah Beach, Oman
The Cove, UAE
Andermatt, Switzerland
Orascom Development’s Land Bank
Orascom Development has a diversified portfolio of destinations,
which is spread over eight jurisdictions covering Egypt, UAE,
Jordan, Oman, Switzerland, Morocco, Montenegro and
United Kingdom. It is a leading developer of fully integrated
and infrastructure-supported destinations that include hotels,
private villas, apartments and leisure facilities–namely, golf
courses and marinas.
Total land
bank
Completed
EGYPT
49.7
14.5
4.0
1.0
30.1
El Gouna
36.9
9.5
3.5
0.6
23.3
4.3
2.6
0.0
0.0
1.7
Destination Name
Taba Heights
Our strategy is based on the creation of value in our land bank
for the medium and long-term stakeholders. To that end, we
accumulate large tracts of land with enough space to develop
self-sufficient communities and towns. Subjected to certain
conditions, the Group has, up to this date, secured land banks of
approximately 102.7million m2 in several jurisdictions. Moreover,
Orascom Development holds its undeveloped land banks
primarily by way of contractual rights or usufructs, with the option
to acquire legal title.
Undeveloped
2.6
1.9
0.2
0.1
0.4
Makadi
3.8
0.4
0.2
0.0
3.2
Qena Gardens
0.8
0.0
0.0
0.0
0.8
1.2
0.2
0.1
0.3
0.7
Amoun Island
UNITED ARAB EMIRATES
0.02
0.0
0.0
0.0
0.0
0.3
0.3
0.0
0.0
0.0
The Cove
0.3
0.3
0.0
0.0
0.0
JORDAN
0.0
0.0
0.0
0.0
0.0
Tala Bay
0.0
0.0
0.0
0.0
0.0
OMAN
22.8
1.1
0.2
4.5
16.9
Jebel Sifah
6.2
0.2
0.0
1.5
4.5
Salalah Beach
15.6
0.9
0.2
2.2
12.2
0.2
As Sodah Island
1.0
0.0
0.0
0.8
City Walk 1
0.1
0.0
0.0
0.0
0.1
SWITZERLAND
1.5
0.0
1.3
0.1
0.1
Andermatt
1.5
0.02
1.3
0.1
0.1
MOROCCO
15.0
0.0
0.0
3.0
12.0
Chbika
15.0
0.0
0.0
3.0
12.0
MONTENEGRO
6.9
0.0
0.1
0.1
6.7
Luštica
6.9
0.0
0.1
0.1
6.7
UNITED KINGDOM
6.6
0.0
0.0
0.0
6.6
6.6
0.0
0.0
0.0
6.6
102.7
16.0
5.6
8.7
72.4
16%
5%
8%
71%
Eco-Bos
Total
Percentage of Total Land bank Size
1
Under
development
Haram City
Fayoum
The Group has also developed eight operating destinations
including tourist destinations such as El Gouna on the Red
Sea coast, Taba Heights in the Sinai Peninsula and Makadi in
the Red Sea district in Egypt, The Cove in Ras Al Khaimah in
UAE, Jebel Sifah and Salalah Beach in Oman and recently,
Andermatt Swiss Alpes in Switzerland, by launching the Chedi
Andermatt Hotel in December, in addition to the budget housing
community of Haram City in Greater Cairo area in Egypt.
Furthermore, several destinations are currently in various stages
of development and planning in Oman, Morocco, Montenegro,
and the United Kingdom.
Under
construction
An understanding has been reached between Orascom Development and the government of Oman in 2007, however no offical land has been allocated to Orascom Development yet.
Land categories
Definition
Total Land Bank
Any plot of land, developed or undeveloped, which is under the direct or indirect possession of Orascom
Development by virtue of lease, usufruct and/or ownership rights and over which Orascom Development
may have further rights to develop, fully own, lease to third parties, sell to third parties, grant sub-usufruct
rights to third parties, or otherwise dispose to third parties. Each plot of land is governed by the respective
agreement between Orascom Development (directly or indirectly) and the respective governmental entity,
shareholders, and/or investors
Completed
Any plot of land where infrastructure is completed and individual elements of the projects are completed
Under construction
Any plot of land where infrastructure is completed and individual elements of the projects are under construction
Under Development
Any plot of land where infrastructure is under construction but not yet completed
Undeveloped
Any plot with zero infrastructure (raw land)
2013 Annual Report
EL GOUNA, EGYPT
OPERATING DESTINATION
EL Gouna is Orascom Development’s flagship town and the
Group’s “Life as it should be” development benchmark. It is a selfsufficient, fully integrated resort town, stretching across 10 km of
pristine shoreline on the beautiful Red Sea coast with a total land
area of 36.9 m2. El Gouna offers unparalleled lifestyle attracting
a growing multinational community of approximately 22,000
residents. Year-round sunshine, shimmering lagoons, turquoise
beaches, and being a 4-hour flight from Europe make El Gouna
the ultimate paradise escape. It boasts world class infrastructure,
upscale services and is home to some of the world’s most
reputable brands in the tourism and leisure industries.
The town’s luxury facilities include a landing strip, three international standard marinas, two 18hole championship golf course, 16 hotels, two Angsana Spa outlets, a state-of-the-art Lax Gym
and an international standard hospital providing 24-hour emergency care. El Gouna is also an
educational pole with the only pilot campus of the Technische Universität Berlin, a field study
center of the American University in Cairo, international and Egyptian curriculum schools, a
German-Egyptian hotel school, and a nursing institute based on American training programs.
Additionally, the town has over a hundred restaurants and bars, scuba diving, yachting,
fishing, and fully equipped water sports centers, tennis and horse-back-riding; at El Gouna
active pursuits for every age group are at hand.
A culture hub with a public library affiliated to the world-famous Bibliotheca Alexandrina, a Culturama
multimedia cultural presentation, a mosque and a church, as well as ongoing cultural festivals and
major events. Being Egypt’s most environmentally friendly destination, El Gouna is honored to be the
powerhouse behind the Green Star Hotel Initiative that has since swept over the country.
Current Resort Amenities
•
•
•
•
•
•
•
16 hotels with 2,707 guestrooms
2,872 residential units sold since 1997
463 commercial outlets
International standard hospital
International standard schools
Public library affiliated to Bibliotheca Alexandrina
Satellite campuses of prestigious institutions including
Technische Universität Berlin &American University
in Cairo
• Three world class marinas & a Yacht Club
• Two 18-hole championship golf courses
• Cable Park; a complete water sports complex
Progress in 2013
• Completed the construction of El Gouna Cable
park; a complete watersports complex with two
spacious cables, conforming to Olympic standards
• “2013 Best Specialized Port Award” granted by the
Maritime Transport Sector to Abu Tig Marina
• Signed a new agreement with Budget Transportation to be
responsible for all transportation services within El Gouna
• Enhanced delivery of units in Ancient Sands
• Completed the construction of the new golf course
in Ancient Sands
• In December 2013, Orascom Development took over
the management of Club Paradisio El Gouna, which
was previously managed by Club Med
33
2013 Annual Report
TABA HEIGHTS, EGYPT
Taba Heights is the Group’s second fully self-sufficient resort
town, developed after the successful model of El Gouna and
home to approximately 4,000 permanent residents. The
destination comprises a total land area of approximately 4.3
million m2 with around 2.8 million m2 already developed. The
integrated upscale resort town boasts breathtaking scenery
and a supreme location overlooking four countries: Egypt,
Israel, Jordan, and Saudi Arabia with Taba International
Airport only 25 km away.
The Taba Heights Marina is the first legitimate port of entry in the region. A localized port
that offers maritime visitors direct access, entry and secure moorings, making the Gulf
of Aqaba a much more attractive and appealing destination to sail to. The marina has
approximately 11,500 m2 of water area, with depths between 2.5 and 3 meters near the
main building. The marina can comfortably accommodate up to 50 yachts and provide
overnight mooring. On the 30th of September 2012, in the presence of the Egyptian
Prime Minister, Orascom Hotels and Development succeeded in reopening Marina Taba
Heights after its closure since the 19th of June 2011. In the beginning of 2013, the Group
started the development plan of the International Tourist Marina to increase the number
of passengers through constructing two luxury hall-buildings, arrival hall & departure
hall, fully furnished by all required tools and equipment adding to the destination’s lavish
amenities and the clients’ exceptional experience.
Taba Heights is also a popular starting point for excursions to UNESCO World Heritage
sites such as the monastery of Saint Catherine, the rose-red city of Petra, the desert of
Wadi Rum, the holy city of Jerusalem and the Dead Sea.
Current Resort Amenities
•
•
•
•
•
•
•
Six 4/5-star Hotels with 2,365 guestrooms
18-hole championship golf course
5-star water sports center
First man made salt cave
Hospital
School
Progress in 2013
• In December 2013, Orascom Development took
over the management of El Wekala Golf Resort,
which was previously managed by Three Corners
• Constructed two luxury hall-buildings, arrival hall &
departure hall, fully equipped
• Finished the construction of Sands managed Casino
in Miramar Hotel, which is planned to open in 2014
as the destination’s first gaming center promising a
new entertainment edge to the town
35
2013 Annual Report
HARAM CITY, EGYPT
Haram City
During the last quarter of 2006, Orascom Development
entered the budget-housing arena, a business strategically
focused on developing affordable income housing throughout
Egypt. Orascom Housing Communities (OHC), a fully owned
subsidiary of Orascom Hotels and Development, manages this
line of business.
Resort Amenities at Completion
•
•
•
•
•
10,000 built residential units
A Hospital
A Clinic
Four Schools
Progress in 2013
Launched in 2007 as the first of its kind in Egypt, Haram City’s award-winning model of
affordable housing within a sustainable and fully integrated township encourages social
responsibility and civil engagement.
Spanning over approximately 2.6 million m2 of land, the project is now home to
more than 30,000 residents. As a truly integrated development, Haram City offers
comprehensive community facilities including schools, clinics, worship houses, sporting
amenities, a cinema, and 89 commercial outlets.
Beyond ensuring the town’s self-sustainability through employment opportunities in
commercial and industrial sectors, the city hosts various projects designed to stimulate
job creation and benefits the overall community as well as underprivileged segments.
In order to improve the quality of education of the town students, the Group subsidizes
four public schools such as Haram City Language School, making it more affordable
for the enrolled students to learn English, German, and Arabic.
• Planned the Industrial zone and finished its roads
• Delivered 450 units to the clients
• Obtained permits for the commercial area, new
school and church
• Started the construction of the Club building
• Signed a contract with the internet operator, link dot
net, to raise OHC’s revenue share from 18% to 25%
and successfully implemented the network covering
1,200 units
• Fully automated the operation service charge cycle
37
2013 Annual Report
MAKADI, EGYPT
Settled in the heart of the Red Sea only 30 km away from
Hurghada International Airport, lays the unique residential
and touristic community, Makadi. As the only residential
community in Makadi Bay, the destination adds a different
flavor to the area when compared to its neighboring resortbased communities. With a mission to provide upper middle
class families the opportunity to own a home at affordable
prices, the town resort is now featuring a variety of residential
units, Makadi Garden Azur Hotel and Makadi commercial mall.
Makadi stretches across 3.8 million m2 providing both its residents and visitors all the
services and facilities that they would require and desire. Orascom Development
Management, a wholly owned subsidiary of Orascom Development, acts as the project
manager in charge of the development, sales, marketing and community management.
Being the first gated community in Hurghada, Makadi is destined to provide the
community with high quality services, among which is Hurghada’s first club “Makadi
Club” that offers social and sports activities, not to mention the spacious commercial
area, medical center, hotels and school. With such services being provided, not only
owners and hotel visitors of Makadi will enjoy their stay, but also all of Hurghada will find
something suitable in Makadi to fulfill their needs.
• Makadi Garden Azur, 4-star hotel with 287
guestrooms
• Commercial mall with 28 outlets
• Medical center
• School
• Sport club
• Worship areas
Progress in 2013
• Completed the construction of the Makadi Garden
Hotel launched in February 2014.
• Delivered 342 residential units
• Sold land plots to investors
• Developed commercial facilities
• Started the operation of the commercial mall
39
2013 Annual Report
QENA GARDENS, EGYPT
Following the success of Haram City, Orascom Housing Communities
was allocated 0.8 million m2 of land in the Qena Governorate, Upper
Egypt, in 2010. Committed to providing high-quality affordable housing
units within sustainable and fully-integrated townships in Egypt, Qena
Gardens was master planned to incorporate 8,000 residential units, a
school, clinics, shopping areas, and an entertainment venue.
Progress in 2013
• Completed the landscape works with
Irrigation network
• Started the construction of Tamr Henna
Building featuring 22 shops
FAYOUM, EGYPT
In appreciation of its proven development record, in 1998, the
Egyptian Government awarded Orascom Development a total land
area of 1.2 million m2 in Fayoum, located 100 km southwest of Cairo
in an ideal location overlooking the spiritual lake of Qarun.
Plans are set to develop two luxury residential communities, Byoum
and Al Roboua, in Fayoum. The master plan for Byoum includes
a marina, a 4-star hotel, and 265 residential units. Whereas its
neighboring sister-project, Al Roboua is setto feature 36 stand-alone
villas with supporting infrastructure.
41
2013 Annual Report
AMOUN ISLAND, EGYPT
ROYAL AZUR & CLUB AZUR, EGYPT
OTHER HOTEL
Grand Resorts
Club
Royal
Club
M A K A D I BAY
43
M A K A D I BAY
Orascom Development entered into a lease agreement with the Egyptian
Government in 2005 to develop Amoun Island.
Located at Makadi bay, one of Hurghada’s
fascinating shores, 25 km away from
Hurghada International airport, the two
hotels overlook their own spacious private
sandy beach, offering seven restaurants and
bars, a fully equipped water sports center,
two tennis courts, a squash court, billiards,
a fully equipped fitness room and two
swimming pools.
The island is situated off the main Nile river bank in Aswan and has
a total project area of 22,000 m2. The destination plan presents an exclusive
luxury boutique-style hotel to be operated by Cheval Blanc (Group LVMH),
accommodating 38 luxurious suites with lounge areas. The destination will
also feature private pools, an exquisite restaurant, a lounge bar, a wine cellar
and a private library.
ZAHRA OBEROI, EGYPT
OTHER HOTEL
Described as one of Egypt’s most spacious
cruise ships with 27 cabins, Zahra Oberoi
offers the highest standards of hospitality
and service. The Zahra Oberoi is the only
Nile Cruiser with a full-service spa and
is recognized by the Egyptian Ministry of
Tourism as the “Best Cruiser on the River
Nile”.
2013 Annual Report
THE COVE, UAE
The Cove is located at the entrance of the Ras Al Khaimah
emirate on an idyllic water inlet at Arqoob beach overlooking
the Arabian Gulf, just 8 km from the city centre, 20 km from
Ras Al Khaimah airport and an 87 km drive from Dubai.
It is in close proximity to two golf course, shopping mall,
supermarket, international school and hospital.
Current Resort Amenities:
• 188 residential units
• Close proximity to two golf courses, several
shopping malls and supermarkets, international
schools, and hospitals of international standard
Progress in 2013
The development comprises a total area of around 300,000 m2, of which approximately
282,000 m2 have been developed. The destination is fully complete with a 600 meters
private beachfront and comprises an internationally renowned 5-star hotel operated by
Rotana, exclusive real estate, and a range of upscale services and amenities.
• 5-star Rotana hotel with its 346 guestrooms,
remains a top performer in the Orascom
Development portfolio
• Awarded the Best Hotel Architecture for Ras Al
Khaimah, UAE – 2013 Hotel International Awards
• Awarded the Signum Virtutis (Seal of Excellence) –
2013 Seven Star Global Luxury Awards
• Awarded the Luxury Coastal Resort Middle East
Winner – 2013 World Luxury Hotel Awards
45
TALA BAY, JORDAN
OTHER HOTELS
Tala Bay was the Group’s first regional rollout of its model
outside of Egypt.
Situated on the Gulf of Aqaba in the northern Red Sea, Jordan’s only sea gateway, Tala
Bay is built on a manmade lagoon and is one of the largest tourism destinations in the
country, covering a land area of approximately 2.7 million m2. The project is located
on the outskirts of Aqaba, approximately 10 km from the Aqaba International Airport.
Orascom Development owns and manages the Marina Town Plaza Hotel, which
started operations in April 2008 encompassing 260 rooms. Connected to Sinai in
Egypt via the Taba Heights Marina, Tala Bay is a tourist attraction for its proximity to
Sinai’s cultural attractions and the ancient town of Petra in Jordan.
2013 Annual Report
47
2013 Annual Report
JEBEL SIFAH, OMAN
A natural getaway located on the shores of Oman, Jebel Sifah
is Orascom Development’s third biggest town, set amongst
some of the region’s most beautiful terrain including the
breathtaking Hajjar Mountains, the highest mountains in
the Arabian Gulf. A large fully integrated tourism complex
covering a vast and beautiful area of 6.2 million m2, Jebel Sifah
is planned to include 100% freehold residences along with
all the amenities and infrastructure of a modern luxury town
with the possibility for expatriates to obtain official residency
permits upon property purchase.
Resort Amenities at Completion:
The design and architectural inspiration of the town is drawn from the rich historical
traditions of Oman and will provide fantastic panoramic views of the sea and sky
thanks in part to a 25%-low building density. Within an hour’s drive from Muscat,
Jebel Sifah is also easily accessible from Europe and the Arabian Peninsula.
Progress in 2013
• 950 total residential units; including 18 completed
apartment blocks
• First inland marina in Oman, with a berthing capacity
to hold 84 boats in water and 120 on land (opened
in 2012)
• Planned 18 hole PGA golf course designed by Peter
Harradine
• Six Hotels with 1,062 planned guestrooms; Four 5-star
hotels including Four Seasons, Banyan Tree, Rezidor
Missoni, Angsana, Lagoon Hotel, and One 4-star
Sifaway Boutique Hotel (55 rooms opened in 2012)
• Restaurants, cafes, shops, pharmacies& luxuriously
appointed spas
• 32 units handed-over including 31 apartments
and 1 villa
• 5 new shops opened in Marina Town
• New Conference room opened in Sifawy Boutique hotel
• Infrastructure of 1,760 meter of roads completed
(including hardscape, planting plumping pipes, water
and fire pipes, and medium and low voltage cables)
• Civil and electromechanical work completed in 3
substations
• Rough shaping of 3 holes of the golf course
• Events that took place during the year include Marina
Festivals, Jebel Sifah Carnival & Fishing competition
and Dubai-Muscat Sailing competition
49
2013 Annual Report
SALALAH BEACH, OMAN
Salalah Beach is the Group’s first and the region’s only tropical
destination that presents the best of modern amenities and
night life combined with an age-old Arabian charm. A
large, family-oriented, integrated tourism complex situated in
the southern part of Oman, approximately 1,000 km from
Muscat, Salalah Beach picturesque view is extended over 8
kilometers of beachfront on the Arabian Seaas well as a manmade lagoon system extending the sea inland.
• 7 hotels with 1,800 planned guestrooms; Five star
& Boutique hotels including Club Méditerranée,
Mövenpick Hotels &Resorts, Lagoon Hotel and
Juweira Boutique Hotel (64 rooms opened in 2012)
Rotana Hotel (399 rooms, opened in March 2014)
• 200 berth Marina and Marina Town
• Two 18-Hole PGA Golf Courses
• Retail venues, restaurants & cafes
Progress in 2013
The destination comprises anarea of 15.6 million m2, located only 20 minutes
away from Salalah Airport and approximately 90 minutes flight from most GCC
countries.Properties are 100% freehold and come with access to all the amenities of
the destination including the opportunity for expatriates to obtain official residency
permits in a tax-free country.
• 46 units handed over including 43 apartments and
3 villas
• Construction works in Rotana Hotel is completed
• Added 18 “Lake Block” apartments operated by
Juweira Boutique Hotel
• 3 new shops opened in Marina Town in addition to
the Sea food restaurant “As Sammak” operated by
Juweira Hotel
• Infrastructure of 1000-meter roads completed
including hardscape, planting, low and medium
voltage cables, plumping pipes, water and fire pipes
51
52
2013 Annual Report
Orascom Development
AS SODAH ISLAND, OMAN
CITY WALK, OMAN
DEVELOPING DESTINATION
DESTINATION IN THE PIPELINE
A secluded island covering 11 million m2, As Sodah is located off the
southern coast of Oman opposite Salalah Beach. The Island is set to
be the region’s niche destination, comprising a luxury boutique hotel to
be managed by Cheval Blanc (Group LVMH) as per the management
agreement signed in 2009. The hotel spans an area of 1 million m2 and
features 32 exclusive pavilions, each having its own private swimming
pool and private access beach. The hotel’s plan also includes a main lodge
and a spa.
City Walk Muscat is the awaited vibrant Downtown City Complex
serving the cosmopolitan capital city of Oman, Muscat. The
masterplan encompasses a modern administrative tower and a
luxury shopping mall in addition to a five star hotel with a capacity
of 270 guestrooms.
An understanding has been reached between Orascom
Development and the government of Oman in 2007, however no
official land has been allocated to Orascom Development.
53
2013 Annual Report
ANDERMATT, SWITZERLAND
The Andermatt Swiss Alps development is transforming the
traditional Swiss Alpine village into one of the best year-round
destinations in Switzerland comprising some of the finest facilities.
With a total land bank of approximately 1.4 million m2, Andermatt
is situated at 1,440 meters above sea level and lies approximately
1.5 hours by car from Zurich and 2 hours from Milan. Its central
location results in excellent connections to the major national and
international transport routes.
Every building in Andermatt Swiss Alps has been individually designed by one of over 30
selected Swiss and international architects to create a beautiful and eclectic appearance
for the master-planned resort. The resort will gain 7,500 m2 of commercial space offering
a full range of retail and commercial services. To maintain a perfectly harmonious and
peaceful environment the village centre will be a car free zone and enough underground
parking spaces are provided for visitors and residents.
The new accommodation and sports facilities mean that whether you seek adrenalin or
relaxation your needs are catered for in the most spectacular surroundings, from an ecologically
designed 18-hole golf course meeting international tournament standards ideal for outdoor
summer activities, to modernized ski facilities linking up with the neighbouring ski area of
Sedrun to form a 120-kilometer ski domain. The highly integrated infrastructure and state of
the art facilities will also make the village the perfect location for cultural events and congresses.
In March 2013, Mr Samih Sawiris has become the new majority shareholder of ASA with a
51% share by converting his loans to the Group into ASA equity, and acts as new Executive
Chairman of ASA, and is committed to invest at least CHF 150 million to secure funding
of the critical size of the resort until 2017. The Group has a remaining share of interest of
49% in ASA , remains committed to the project and will benefit from any future upside.
• Six 4- and 5-star hotels with 844 planned guest rooms.
The Chedi Andermatt; 5-star Deluxe Hotel, commenced
operations in December of 2013 with 105 rooms and suites.
• Approximately 500 apartments in 42 buildings
• 25 exclusive bespoke chalets
• Largest ski arena; Andermatt-Sedrun in Central Switzerland
• 18-hole Championship golf course designed by the
renowned architect Kurt Rossknecht, Lindau (GER)
• Sports Centre with all-season leisure pool
• Conference facilities
• 35,000 m2 of commercial space
Progress in 2013
• Samih O. Sawiris is the new majority shareholder and
Executive Chairman with a 51 % stake and Orascom
Development AG remains shareholder with a 49 % stake
• The Andermatt golf course received positive press during
its first year of trial runs with an official opening scheduled
for 2016, whilst having started the construction of the golf
clubhouse scheduled to open by late 2014
• Opening of The Chedi Andermatt 5-star Deluxe Hotel with
105 rooms and suites in December
• The additional Chedi-Hotel-residences body shell has been
completed and those units should be finished by the end of 2014
• Progress in the construction of three further apartment buildings
with more than 40 apartments to be delivered in 2014
• Building of a ski arena combining Andermatt and Sedrun ski
areas with new lifts is on track with first equipment ordered
55
2013 Annual Report
CHBIKA, MOROCCO
Nestled amidst desert, cliffs and the sparkling shores of
the Atlantic Ocean, Chbika is the personification of a hidden
Saharan paradise which Orascom Development is planning
to turn into Morocco’s first self-sufficient and fully integrated
tourist destination.
Chbika is ideally located approximately 400 km south of Agadir directly in front of
the Canary Island of Fuerteventura on the Atlantic Ocean, with a total land area of
15 million m2.
The Group master planned the area to become a modern oasis of harmony
characterized by a cultural blend. Home to eight planned hotels, 1,166 apartments
and 685 villas, atmospheric riads, and even customizable mansions in the Kosour
neighborhood, Chbika, like all other Orascom Development signature towns, will
feature state-of-art facilities including an 18-hole championship golf course, a marina,
shops, dining outlets, as well as a medina-style handcraft center and a medical facility.
• Eight 4 and 5 star hotels with 2,500 planned
guestrooms
• 1,166 apartments , 685 villas and customizable
mansions in the Kosour neighborhood
• World class marina with a capacity of 100 berths and
a medina style city center
• 18 hole golf course
Progress in 2013
• One of the riad sites known as “Maison d’hôtes
Chbika” is used to organize Chbika Weekends
• The second riad is used for administration offices
and may be renovated and furnished to host more
“Chbika Weekends” clients
• More than 50,000 people were introduced to
Chbika through new social media outlets
• The company is focusing on securing the financial
package to enable the construction of three hotels
with a minimum critical mass of 1,000 rooms
57
2013 Annual Report
LUŠTICA BAY, MONTENEGRO
Luštica Bay will be a fully integrated, self-sufficient town and
luxury resort. Perfectly placed in the Adriatic coast’s idyllic
Trašte Bay, only 10 km from Tivat airport and 60 km from
Croatia’s Dubrovnik airport, with a land bank of 6.9 million
m2, providing access to one of the world’s most naturally and
historically rich countries.
Montenegro enjoys a rare combination of wild, natural beauty and authentic village
character, unique amongst Mediterranean destinations, a charm that has made it one
of the fastest growing in Europe and one the continent’s best real estate investment
opportunities.
Mindful of the country’s rapid expansion, Luštica Bay proceeds with a philosophy of
preserving the country’s natural beauty and cultural heritage through the project’s
planning, execution and long term operation. From Luštica Bay’s branding to its
sustainable architectural design and minute carbon footprint, it will blend smoothly
into the backdrop of the peninsula, the first certified eco-labelled development in
Montenegro.
• Over 1, 500 residential units comprising bespoke
villas, townhouses and apartments
• 7 hotels
• A Gary Player signature 18-hole championship golf
course
• Spa & wellness centre
• Two world-class marinas with a total of 170 berths
• A conference centre
• Year-round facilities including shops, restaurants,
schools and medical services
Progress in 2013
• 100 units sold by October since sales began in the
summer of 2012
• Construction mobilization for the marina commenced
• Construction of the first 71 apartments in 10 buildings
began in July, with first homes to be delivered in
January 2015.
59
ECO-BOS, UK
DESTINATION IN THE PIPELINE
The Group formally established a joint venture in May 2010
with Imerys; multinational industrial minerals company,
to develop an integrated Eco Town in Cornwall, United
Kingdom. The total land bank for the project amounts to
6.6 million m2, divided over six plots. The Cornwall project
scheme was developed in response to the United Kingdom
Government’s Eco-town competition designed to promote
low carbon, sustainable communities across the country. The
British government’s official recognition of the Eco-Bos plans
as one of the country’s first large scale “green” developments,
is seen as a significant accolade for the scheme.
Eco-Bos will offer a mixed portfolio of 5,000 real estate dwellings including
affordable housing and upscale residential units. These will be complemented by
a 5-star hotel and a marina with a berth capacity of 125 vessels and a variety of
commercial operations. The Eco-Bos proposals are seen as a rare opportunity
to provide significant economic, social, and environmental benefits by creating
employment and helping to reenergize the local community.
2013 Annual Report
61
62
Orascom Development
5. Corporate Governance
2013 Annual Report
63
2013 Annual Report
65
5. Corporate Governance
5.1 Group Structure and Significant Shareholders
Group structure (Reporting structure)
Significant shareholders
Since the initial public offering of the Company’s shares in May 2008 through the end of the 2013 financial year, the following shareholders have disclosed
participation in the Company of 3 percent or more in voting rights (in accordance with Art. 20 SESTA2)3:
Orascom Development Holding AG
Hotels
Real Estate &
Construction
Destination
Management
Other
Segments
The operating business of Orascom Development Holding AG (“Orascom Development” or the “Company”) is organized into the following segments:
Hotels, Real Estate and Construction, Destination Management, and Other Segments.
As of the end of the 2013 financial year, the following listed companies were part of Orascom Development’s scope of consolidation:
Company
(Altdorf, Switzerland)
The market capitalization of Orascom Development as per December 31, 2013 is CHF 415,302,789.
Orascom Development has a dual listing with its primary listing on the main board of the SIX Swiss Exchange.
The secondary listing is in the form of EDRs (Egyptian Depositary Receipts) on the EGX Egyptian Exchange
(20 EDRs = 1 equity share).
SIX Registration
Exchange
SIX Swiss Exchange
SymbolODHN
Security number
003828567
ISIN
CH0038285679
Name of Shareholder
Date of latest disclosure4
Number of shares
Percentage of ownership of the total
equity capital and voting rights5
Samih O. Sawiris6
May 13, 2008
13,534,714
60.82%
Janus Capital Management LLC7
Aug. 25, 2008
1,156,323
5.08%
A
B
C
On September 21, 2011, Blue Ridge Capital Holdings LLC and Blue Ridge
Capital Offshore Holdings LLC8 disclosed that their participation in the
Company had fallen below 3 percent in voting rights.
EGX Registration
ExchangeEGX Egyptian Exchange
SymbolODHN
ISINEGG676K1D011
Orascom Hotels & Development S.A.E. (Cairo,
Egypt)
EGX Registration
ExchangeEGX Egyptian Exchange
Market capitalizationEGP 4,312,727,9551
SymbolORHD
ISIN EGS70321C012
Orascom Hotels & Development S.A.E. is 99.68% owned by Orascom Development
1
The last trading day of Orascom Hotels & Development S.A.E. on EGX was on December 31, 2009.
Pursuant to a tender offer completed in January 2011, Orascom Development increased its holding in the Egyptian subsidiary Orascom Hotels & Development S.A.E. to 99.68%.
For information on the non-listed companies comprised by Orascom Development’s scope of consolidation, please refer to Note 19 (Subsidiaries) of the
consolidated financial statements.
There are no cross-shareholdings between the Company and any other
entity that would exceed 5 percent of capital or voting rights on both sides.
On November 7, 2013, Orascom Development disclosed that it has
terminated the securities lending agreement entered with Samih O. Sawiris
under which Orascom Development was entitled to lend up to 1,286,353
registered shares of Orascom Development from Samih O. Sawiris. This
termination led to the decrease of Orascom Development Holding’s
participation in the company below 3 percent in voting rights.
Aside from the above, the Company is not aware of a shareholder holding
a participation of 3 percent or more of voting rights.
Swiss Federal Act on Stock Exchanges and Securities Trading.
The table, in accordance with the SIX Swiss Exchange’s guidelines, shows significant
shareholders’ participations as last disclosed pursuant to Art. 20 SESTA. The number of shares
and percentages shown conform to the situation at the time of the respective last disclosure.
They do not necessarily conform to the situation as per December 31, 2013, given that a
shareholder may have purchased or sold shares subsequent to the last disclosure, but may not
have thereby crossed a disclosure threshold. See also Note 5 in respect of the percentages
shown. For information on the participations of shareholders exceeding 3 percent of voting
rights as reflected in the Company’s share register as of December 31, 2013, refer to Note
27.5 of the Company’s non-consolidated financial statements.
4
The date indicated is (a) as from 2010, the date of publication on the SIX Swiss Exchange’s
online database; (b) prior to 2010, the date of the issue of the Swiss Commercial Gazette, in
which the disclosure was published or, in those cases where the latest disclosure was made in
or in conjunction with the Offering Circular published by the Company in the course of the
initial public offering of its shares, the date of the Offering Circular (May 13, 2008).
5
The percentages shown relate to the Company’s registered share capital as of the date
of the respective disclosure. For information on changes in capital since the founding of
the Company, refer to Section 6.2. In those cases where the latest disclosure was made
2
(Cairo, Egypt)
Cross-Shareholdings
3
in or in conjunction with the Offering Circular published by the Company in the course
of the initial public offering of its shares, the percentages shown are those disclosed as
“Expected holding upon completion of the Offering (assuming full exercise of OverAllotment Option).”
6
The shares of Samih O. Sawiris are held directly and through his entities Thursday Holding
Ltd. (former TNT-Holding Ltd.) and SOS Holding Ltd.
7
Janus Capital Management LLC, with its principal office at 151 Detroit Street, Denver, CO
80206, is the investment adviser of (a) Janus Overseas Fund, with its principal office at
151 Detroit Street, Denver, CO 80206, (b) Janus Adviser International Growth Fund,
with its principal office at 151 Detroit Street, Denver, CO 80206, and (c) Janus Aspen
Series International Growth Portfolio, with its principal office at 151 Detroit Street, Denver,
CO 80206.
8
Blue Ridge Capital Holdings LLC, with its principal office at 660 Madison Avenue, New
York, NY 10065, is the general partner of Blue Ridge Limited Partnership, with its principal
office at 660 Madison Avenue, New York, NK 10065. Blue Ridge Capital Offshore
Holdings LLC, with its principal office at 660 Madison Avenue, New York, NY 10065,
is the general partner of Blue Ridge Offshore Master Limited Partnership, with its principal
office at P.O. Box 309, Grand Cayman KY1-1104, Cayman Islands.
2013 Annual Report
67
5.2 Capital Structure
Capital
As of December 31, 2013, the Company’s issued share capital amounted to
CHF 662,201,010.40 and was divided into 28,543,147 registered shares
with a nominal value of CHF 23.20 each, fully paid in. The conditional capital
amounted to CHF 130,489,699.20. There was no authorized capital as of
December 31, 2013.
Authorized and conditional capital
Authorized capital
The ordinary general meeting of shareholders, held on May 13, 2013, did not
vote to create any new authorized capital or extend the authorized capital
which existed at this time. Therefore, as of May 23, 2013, the Company does
not have any authorized capital.
Conditional capital
Art. 4b of the Articles of Incorporation, relating to the Company’s conditional
capital, reads as follows:
“The share capital may be increased by a maximum amount of CHF
130,489,699.20 through the issuance of up to 5,624,556 fully paid
registered shares with a nominal value of CHF 23.20 each, (a) up to
the amount of CHF 14,489,699.20 corresponding to 624,556 fully
paid registered shares through the exercise of option rights granted to
the members of the board and the management, further employees and/
or advisors of the company or its subsidiaries, (b) up to the amount of
CHF 116,000,000 corresponding to 5,000,000 fully paid registered
shares through the exercise of conversion rights and/or warrants granted
in connection with the issuance of newly or already issued bonds or other
financial instruments by the Company or one of its group companies. The
subscription rights of the shareholders shall be excluded.
The Board of Directors may restrict or withdraw the right for advance
subscription (Vorwegzeichnungsrecht) of the shareholders in connection with
(i) the financing (refinancing inclusively) of acquisitions of enterprises or parts
thereof, participations or other investment projects of the company and/or its
subsidiaries or (ii) the placement of convertible bonds or financial instruments
with conversion or option rights on the national or international capital
market. In case the right of advance subscription (Vorwegzeichnungsrecht)
will be withdrawn, (x) the bonds or financial instruments have to be placed
at market conditions, (y) the period of time for exercising the conversion
rights or the option rights may not exceed 10 years and (z) the exercise or
conversion price of the new registered shares has to be fixed at the conditions
of the market. The terms and conditions of the convertible bonds or financial
instruments with option or conversion rights, the issue price of the new shares,
the dividend entitlement as well as the type of contribution shall be determined
by the board of directors.”
Shares and participation certificates
As of December 31, 2013, no option rights, conversion rights, or warrants had
been granted on the basis of Art. 4b.
Changes in capital in the past three years
2011
At the ordinary general meeting of shareholders on May 23, 2011, it was
resolved to reduce the share capital by CHF 18,338,526.70 from CHF
672,882,864.30 to CHF 654,544,337.60 by reducing the nominal value
of each of the 28,213,118 registered shares from CHF 23.85 to CHF 23.20
and to remit the amount of reduction of CHF 0.65 per registered share to the
shareholders. At the same meeting it was resolved that the nominal value of
any shares created from authorized or conditional capital in accordance with
Art. 4a and Art. 4b of the Articles of Incorporation (cf. next paragraph) until
completion of the capital reduction be equally reduced by CHF 0.65 and the
amount of the reduction be remitted to the respective shareholders.
At its meetings of July 14, 2011 and July 28, 2011 (i.e. before the share capital
reduction described in the preceding paragraph had become effective), the
Board of Directors resolved, based on the authorization included in Art.
4a of the Articles of Incorporation, to increase the share capital by CHF
7,871,191.65 through the issuance of 330,029 new registered shares, from
CHF 672,882,864.30 to CHF 680,754,055.95, divided into 28,543,147
registered shares with a nominal value of CHF 23.85 each.
The share capital reduction resolved by the shareholders on May 23, 2011
(see above) became effective on August 8, 2011. The payment for the
reduction of CH 0.65 per registered share amounted to a total of CHF
18,553,045.55. The registered share capital after the reduction amounts to
CHF 662,201,010.40 and is divided into 28,543,147 registered shares with
a par value of CHF 23.20 each.
2012
The share capital was not changed in 2012 and no decisions have been made
on changes in share capital. The registered share capital as of December 31,
2012 amounted to CHF 662,201,010.40 and is divided into 28,543,147
registered shares with a par value of CHF 23.20.
2013
The share capital was not changed during the year under review and no
decisions have been made on changes in share capital. The registered share
capital as of December 31, 2013 amounts to CHF 662,201,010.40 and is
divided into 28,543,147 registered shares with a par value of CHF 23.20.
The 28,543,147 registered shares with a par value of CHF 23.20 are fully
paid in. They are in the form of dematerialized securities (Wertrechte, within
the meaning of the Swiss Code of Obligations) and intermediated securities
(Bucheffekten, within the meaning of the Swiss Federal Intermediated Securities
Act). Each registered share carries an equal right to dividend payments.
Voting rights are described in Section 5.7 The voting rights of registered
shares held by the Company or any of its subsidiaries are suspended. No
preferential or similar rights have been granted. As of December 31, 2013, no
participation certificates (Partizipationsscheine) have been issued.
Profit sharing certificates
The Company has not issued any profit sharing certificates (Genussscheine).
Limitation on transferability and nominee registrations
Limitations on transferability for each share category; indication
of statutory group clauses and rules for granting exceptions
Pursuant to Art. 5 of the Articles of Incorporation, the Company maintains
a share register in which the full name, address, and nationality (in case of
legal entities, the company name and registered office) of the holders and
usufructuaries of registered shares are recorded. Upon application to the
Company, acquirers of registered shares will be recorded in the share register
as shareholders with the right to vote, provided that they explicitly declare
to have acquired the shares in their own name and for their own account.
Acquirers who do not make this declaration will be recorded in the share
register as shareholders without the right to vote (for an exception to permit
nominee registrations, see below).
Exemptions in the year under review
No exemptions from the limitations on transferability of shares have been
granted in the year under review.
Permissibility of nominee registrations; indication of any percent
clauses and registration conditions
Pursuant to the Company’s Regulations on the Registration of Nominees,
the Company may register a nominee in its share register as a shareholder
with the right to vote if either such nominee’s shareholdings do not exceed 5
percent of the issued share capital as set forth in the Commercial Register, or, if
such nominee’s shareholdings exceed that threshold, the respective nominee
discloses to the Company the names, addresses, locations or registered
offices, nationalities and the number of shares held on behalf of all beneficial
owners whose beneficial shareholdings exceed 0.5 percent of the issued
share capital.
Procedure and conditions for cancelling statutory privileges and
limitations on transferability
The Articles of Incorporation do not provide for any privileges. The limitations
on transferability of the Company’s shares, as described before, may be
cancelled by a resolution (amending the Articles of Incorporation) of an
ordinary general meeting of shareholders reuniting the absolute majority
of votes represented at the meeting, or by a resolution of an extraordinary
general meeting of shareholders reuniting a majority of two thirds of the votes
represented (ref. to Section 5.7 below).
Convertible bonds and warrants/options
The Company has not issued any convertible bonds, warrants or options.
2013 Annual Report
Samih O. Sawiris
Adil Douiri
Chairman
Non-Executive Member
After receiving his Diploma in economic engineering from the
Technical University of Berlin in 1980, Mr. Sawiris founded
his first company, National Marine Boat Factory. In 1996, he
established Orascom Projects for Touristic Development and
in 1997 Orascom Hotel Holdings, the two companies later
merged to form Orascom Hotels & Development S.A.E.
(OHD). Furthermore, Mr. Sawiris established El Gouna
Beverages Co. in 1997, which he sold in 2001 when it was
the largest beverage company in Egypt. As of April 1, 2014,
Mr. Sawiris took over the position of the CEO on ad-interim
basis of Orascom Development and also serves as Chairman
of the Board of Directors.
Mr. Douiri is the founding shareholder and CEO of Mutandis, a
Moroccan investment company established in 2008. Mr. Douiri
served in His Majesty King Mohamed VI’s Government as Minister
of Tourism (2002-2004) and later as Minister for Tourism, Crafts
& Social Economy (2004-2007). In 1992 Mr. Douiri founded
Casablanca Finance Group (later renamed CFG Group), the
country’s first investment bank. Until 2002 he acted as chairman of
its supervisory board and is still a board member. He is also a board
member of BMCE Bank, the third largest Moroccan commercial
bank, and MFEx, a Stockholm-based technology company serving the
financial industry. Mr. Douiri graduated as an engineer from the Ecole
Nationale des Ponts & Chaussées (ENPC) in Paris.
Luciano Gabriel
Mr. Gabriel is delegate of the Board of Directors and CEO of PSP Swiss Property Group (PSP). Prior to joining PSP,
Mr. Gabriel worked for Union Bank of Switzerland (1984-1998), where he held management positions in corporate
finance, risk management, international corporate account management and business development. From 1998
to 2002 he was responsible for corporate finance and group treasury at Zurich Financial Services. He serves as a
member of the executive board of the European Public Real Estate Association (EPRA). Mr. Gabriel completed his
studies in economics at the Universities of Bern and Rochester (NY, USA) and his activity as assistant in economics at
the University of Bern in 1983 with the title of Dr.rer.pol.
After having served the Company as member of the Board of Directors for the last five years, Mr. Gabriel decided
not to stand for re-election at the Annual General Meeting of Shareholders on May 13, 2013.
Nicholas Cournoyer
Mr. Cournoyer is a finance and capital markets specialist. He is currently the Managing Director of Montpelier
Investment Management LLP, London, an investment company focusing on Emerging Market equities and distressed
debt. Prior to founding Montpelier in 1992, Mr. Cournoyer worked for Chase Manhattan Bank from 1982 to 1991,
first working in its sovereign and corporate debt restructuring teams in Central and South America (1982 – 1985), the
establishing its New York-based Emerging Markets debt trading group (1985) and finally heading a similar operation
in London (1986 – 1991). He is also the Managing Director of Montpelier Capital Advisors (Monaco) SAM and
resides in Monaco. He holds a Bachelor’s degree in Arts from the Connecticut College (New London, CT).
Due to personal reasons, Mr. Cournoyer stepped down from his position as member of the Board of Directors
of the Company as of September 30, 2013.
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2013 Annual Report
Marco Sieber
Mr. Sieber, born in Lucerne, Switzerland, studied
economics at the Business School in Lausanne.
After graduating with a business degree, in
1989 he took over the family owned company
SIGA Ltd. together with his brother. Mr. Sieber
managed to transform SIGA Ltd. into a company
which operates internationally and which has
over 300 employees. SIGA Ltd. develops and
produces products for the construction sector,
namely in the field of energy-saving sealings.
In 2012, Mr. Sieber also became majority
shareholder in Baertschi Agrartecnic Ltd. Since
2011, Mr. Sieber is an active investor in the
soccer club FC Lucerne (FCL) and since 2013
he is president of the FCL Holding.
..
..
Carolina Muller-Mohl
Ms. Müller-Möhl has been President of the Müller-Möhl
Group since 2000. From 1999 to 2000, she was Vice Chair
of the Board of Directors of Müller-Möhl Holding AG, after
working as a journalist and advertising and PR consultant.
She is currently the chairperson of Hyos Invest Holding AG.
After gaining an International Baccalaureate at Upper School
Salem International College (Germany), Ms. Müller-Möhl
studied politics, history, and law at the University of Heidelberg
and at the Otto-Suhr Institut at the Freie Universität Berlin.
She graduated with a Master’s degree in political science and
completed further studies at the London School of Economics
and at the Europainstitut of the University of Basel.
Franz Egle
Mr. Egle’s background is in strategy development, corporate communications, media
and PR. After holding senior positions in the private sector he was in charge of
communications at the Swiss Federal Department of Foreign Affairs and advisor to the
Minister of Foreign Affairs (1993-1998). Before co-founding Dynamics Group, a Swiss
company providing strategic consulting, communication management and research
analysis, Mr. Egle was a partner of Hirzel.Schmid.Nef Konsulenten, a communication
and financial consultancy firm (1999-2006). Mr. Egle holds a Doctor’s degree in
sociology from the University of Zurich.
Eskandar Tooma
Executive Member (as of September 1, 2013, CFO on ad-interim basis)
Mr. Tooma is a tenured professor of finance and holds the British Petroleum endowed chair with the School
of Business at The American University in Cairo. Mr. Tooma combines academic experience with practical
exposure through assuming a variety of public and private professional posts. He was senior advisor to the
Egyptian Capital Market Authority for 3 years, as well as a member of a variety of committees including the
EGX30 Index Committee, Market Advancement Committee at the Egyptian Stock Exchange, an advisor
and member of the Derivatives and Commodities Exchange Committee with the Ministry of Investments and
an advisor to the Ministry of International Cooperation on Egypt’s Debt Swap Experience. Mr. Tooma sits on
the board of two EGX listed and actively traded companies: Egyptian Resorts Company (ERC) and Rowad
Tourism, he is also the financial advisor to Mr. Samih Sawiris and his investment vehicles “SOS Holding” and
“ Thursday Holding”. Mr. Tooma holds two M.S. degrees, the first in Finance and the second in International
Economics as well as a Ph.D. in Finance from Brandeis University
Jean-Gabriel Pérès
Mr. Pérès has more than 20 years of experience in senior appointments in the hospitality and luxury consumer brands
segments. Since 1999 he has served as President and CEO of Mövenpick Hotels & Resorts. From 1985 to 1996 he
worked with the Le Méridien Group, where he first had responsibility for development in Africa and the Middle East
and as of 1989 was a member of group executive management and head of the Asia Pacific region. Mr. Pérès holds an
MBA degree from the Ecole Supérieure des Sciences Economiques et Commerciales (ESSEC). Mövenpick Hotels &
Resorts has been retained by the Group to manage two of its hotels.
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2013 Annual Report
Orascom Development
73
Name
Function
Nationality
Birth
Elected
first
Elected
until
Audit Committee
Nomination & Comp.
Committee
Samih O. Sawiris
Chairman
EGY
1957
2008
2014
-
-
Adil Douiri
Member
MOR
1963
2008
2014
Member
-
Franz Egle
Member
CH
1957
2008
2014
-
Member
(as of May 13, 2013)
Luciano Gabriel
(until May 13, 2013)
Member
CH
1953
2008
2013
Chair
(until May 13, 2013)
Chair
(until May 2013)
Carolina Müller-Möhl
Member
CH
1968
2008
2014
-
May 13
Member
F
1957
2008
2014
-
Chair
(as of May 13, 2013)
Member (until
September 30, 2013
-
Chair
(as of May 13, 2013)
Member
(as of May 13, 2013)
Nicholas Cournoyer
(until September 30, 2013)
Member
UK / US
1958
2011
2014
Eskandar Tooma
(as of May 13, 2013)
Member
EGY / CA
1976
2013
2014
Marco Sieber
(as of May 13, 2013)
Member
CH
1958
2013
2014
The current members of the Board of Directors are all non-executive, with the exception of Mr. Tooma who has served as Chief Financial Officer of the
Company on an ad interim basis since September 1, 2013. With the exception of the Chairman and Mr. Tooma, none of the members of the Board of
Directors held executive positions with Orascom Development during the three financial years preceding the year under review. Other than as individually
mentioned above, none of these members, and no enterprise or organization represented by them maintains any substantial business relationship with an
Orascom Development subsidiary. As a subsequent event, as of April 1,2014, the CEO left the company and the Chairman took over the position of the
CEO on ad- interim basis.
There are no news in respect of other activities and vested interests which fall within the scope of Subsection 3.2 of the SIX Directive on Information relating to
Corporate Governance dated 29 October 2008.
Elections and terms of office
The Board of Directors is elected by the general meeting of shareholders. In
accordance with the Articles of Incorporation, the Board is composed of a
minimum of three and a maximum of fifteen members, whose term of office
shall not exceed three years (a year for that purpose meaning the period
between two ordinary general meetings of shareholders). Each member’s
term of office is determined upon his or her election, and there are no limits
on re-election.
At the Company’s fourth ordinary general meeting of shareholders held on
May 13, 2013, Mr. Luciano Gabriel decided not to stand for re-election. All
other members of the Board of Directors were re-elected (each by separate
vote) for a term of one year. Mr. Marco Sieber and Mr. Eskandar Tooma were
elected as new members of the Board of Directors.
As of September 30, 2013, Mr. Nicholas Cournoyer decided to resign as a
member of the Board of Directors due to personal reasons.
Internal organizational structure
Board of Directors
The Board of Directors governs the Company and is ultimately responsible
for the Company’s business strategy and management. It has the authority
to decide on all corporate matters not reserved by law or the Articles of
Incorporation to the general meeting of shareholders or to another body.
Subject to its inalienable duties pursuant to the law and to a number of
additional matters , the Board of Directors has delegated the management
of the Company’s business to the CEO. The Board of Directors appoints the
CEO and the other members of Executive Management.
The Board of Directors constitutes itself autonomously and appoints its
Chairman and Secretary, who does not have to be a member of the Board. It
may deliberate if a majority of members are present at a meeting. Decisions
are taken by the majority of votes cast. In case of a deadlock, the Chairman
has a casting vote. A member of the Board of Directors shall abstain from
voting, if he or she has a personal interest in a matter other than an interest in
his or her capacity as shareholder of the Company.
Committees
Two permanent committees have been formed to support the Board of
Directors; these are the Audit Committee and the Nomination & Compensation
Committee. The Lead Director chairs both of the permanent committees. The
duties and competences of both committees are defined as below.
Audit Committee
The Audit Committee consists of two non-executive members of the Board of
Directors as determined by the Board. The two Audit Committee members
currently appointed have broad experience in finance and accounting on the
basis of their professional backgrounds. The Lead Director is a member ex
officio of the Audit Committee.
The mission of the Audit Committee is to assist the Board of Directors in the
discharge of its responsibilities with respect to financial reporting and audit.
The committee reports and issues recommendations to the Board of Directors
regarding yearly and interim financial statements, the auditing process, the
internal control system, the integrity and effectiveness of the Company’s external
and internal auditors and other topics submitted to it by the Board from time to
time. The Audit Committee has no decision-making power.
Nomination & Compensation Committee
The Nomination & Compensation Committee consists of three non-executive
members of the Board of Directors as determined by the Board. The Lead
Director is a member ex officio of the Nomination & Compensation Committee.
The mission of the Nomination & Compensation Committee is to assist the
Board of Directors in the discharge of its responsibilities and to discharge
certain responsibilities of the Board relating to compensation and nomination of
members of the Board and of Executive Management.
The Nomination & Compensation Committee has decision-making power
regarding matters of the compensation of executive members of the Board
of Directors and members of Executive Management. The Nomination
& Compensation Committee issues recommendations to the Board of
Directors without having decision-making power regarding other matters of
compensation, the nomination of Board members and members of Executive
Management, and other topics submitted to it by the Board for the committee’s
consideration.
74
2013 Annual Report
Orascom Development
Work methods of the Board of Directors and its committees
Invitations to attend meetings of the Board of Directors are extended by
the Chairman or the Secretary of the Board. Any member of the Board of
Directors may request the Chairman to convene a meeting. The members of
the Board of Directors and the committees are provided with all necessary
supporting material before a meeting is held, enabling them to prepare for
discussion of the relevant agenda items.
Pursuant to their respective Charters, the committees of the Board of Directors
convene at least once (in the case of the Nomination & Compensation
Committee) or twice a year (in the case of the Audit Committee), but can
be summoned by their respective chairman as often as the business requires.
Meetings of the Audit Committee may, upon invitation by its chairman and
in an advisory function, be attended by members of Executive Management.
In the year under review, the audit committee invited experts from an
independent advisory firm to attend meetings of the audit committee in an
advisory function.
The Company’s auditors are in regular contact with the chairman of the
Audit Committee and have the right to have items added to its agenda.
In the 2013 financial year, the Board of Directors convened for six meetings,
and passed three circular resolutions. Of the six meetings, four were held as
physical meetings, and two were meetings held by telephone conference.
The Audit Committee convened for three meetings. The Nomination &
Compensation Committee convened for two physical meetings and two
telephone conferences. Certain members of Executive Management, in
particular the CEO and the CFO participated in several meetings of the
Board of Directors and the committees. Physical meetings of the Board
of Directors as well as of the Audit Committee and the Nomination &
Compensation Committee typically lasted approximately from three to
eight hours, while telephone conferences typically lasted from thirty minutes
to two hours.
Definition of areas of responsibility
Based on the provision of Art. 15 of the Articles of Incorporation governing the
delegation of duties, the Board of Directors has entrusted the preparation and
the execution of certain of its decisions, the supervision of certain tasks, as well
as certain decision-making powers to the permanent committees. The Board
of Directors has delegated the management of the Company’s business to
the CEO, who may further delegate any of his duties and competencies to
Executive Management and other members of the Company’s management
although the CEO remains fully responsible for all duties and competencies
delegated to him by the Board of Directors.
Excluded from such delegation to the CEO are the inalienable duties of
the Board of Directors as defined by law (Art. 716a Para. 1 of the Swiss
Code of Obligations), the duties of the Board’s permanent committees (as
described above), and decisions on the following matters which remain
reserved to the Board:
1.The approval of the issuance of securities or other capital market
transactions, and the entering into loan agreements in excess of CHF
80 million;
2.The approval of investments and acquisitions (including land acquisitions,
whether by way of contract or by rights in rem, or acquisitions of companies
and participations in companies) as well as divestments, dispositions and
asset disposals in excess of CHF 20 million;
3.The entering into agreements with a value in excess of CHF 20 million
(subject to 1. above);
4.The provision of guarantees, suretyships, liens and pledges and other
security in excess of CHF 20 million;
5.The approval of inter-company agreements of a value exceeding
CHF 20 million.
Information and control instruments vis-a-vis senior management
To ensure that comprehensive information is provided to the Board of
Directors on the performance of the functions delegated by it, members of
Executive Management and other senior managers are regularly invited by
the Chairman or the Lead Director to attend meetings of the Board, or to
participate when individual agenda items are discussed. For example, during
the year under review, the CEO and the CFO were present at all physical
meetings of the Board of Directors. Also during the year under review,
individual Board of Directors members supported Executive Management in
various projects. Furthermore, members of the Board of Directors cultivate a
regular informal exchange of ideas with Company management and regularly
visit the Company’s locations.
In General, the in-house internal audit function has performed many adhoc assignments in addition to the pre- planned assignments. For each
assignment, a report of major findings was presented to and discussed with
the management on the entity level, and corrective actions were agreed.
Executive Management meetings, chaired by the CEO, are held on an (at
least) monthly basis in which performance of operating projects is reviewed
alongside the budget and previous financial year. Key performance indicators
are reviewed as described in the preceding paragraph. Updates on new
projects, whether off-plan or under construction, are shared and future steps
agreed upon.
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2013 Annual Report
Orascom Development
77
Definition of areas of responsibility
The CEO who is responsible for the day-to-day operational management of the Company is supported by the Executive Management. The Executive Management assists the
CEO in developing and implementing the strategic business plans for the Company overall as well as for the principal businesses, subject to approval by the Board.
Aly Elhitamy
The Executive Management further reviews and coordinates significant initiatives, projects and business developments in the segments, regions and in the
corporate services functions and implements Company-wide policies.
Egyptian national, born 1941, Eng. Elhitamy joined Orascom Development four years ago being responsible
for the Construction Segment. In May 2012, he was promoted to Managing Director of Egypt, overseeing
all activities of the Group in Egypt. In October 2012, Eng. Elhitamy became member of the Executive
Management. For the past three decades, Eng. Elhitamy has been heading top managerial positions in
major construction and real estate companies dealing with local and international projects. In addition to his
engineering degree from Cairo University, he is a licensed consultant engineer from the Egyptian Syndicate of
Engineers in Civil Project Management since 1986.
Members of Executive Management
Chief Construction Officer & Managing Director Egypt
Gerhard Niesslein
Chief Executive Officer*
Austrian national, born 1954, Dr. Niesslein joined Orascom Development as CEO on November 1, 2011. He is
an experienced real estate expert who served in leading positions at various companies in Canada and Germany
during the last 35 years. After holding real estate-related positions at Deutsche Bank and Commerzbank, he
became a member of the board of Landesbank Hessen-Thüringen (Helaba) responsible for real estate financings,
investments, and funds. In 1999, he became CEO of DeTe Immobilien GmbH (the real estate business of Deutsche
Telekom). Since 2008, he was CEO of IVG Immobilien AG, Bonn, one of the big real estate companies in Europe.
Julien Renaud-Perret
Chief Development Officer
French national, born 1968, Mr. Renaud-Perret joined the Group in 2006 as a member of Executive
Management in charge of worldwide development activities. Prior to that, he was a member of the executive
committee of Club Méditerranée responsible for the group strategy and implementation with respect to
resort development and asset management. Mr. Renaud-Perret started his career with Euro Disney SCA,
where he held positions in finance and strategic planning. He was educated in France and holds an MBA
degree from INSEAD.
Ahmed El-Shamy
Group Chief Financial Officer**
Egyptian national, born 1971, Mr. El-Shamy joined Orascom Development as the Group Chief Financial Officer
on July 1, 2012. During the last six years Mr. El-Shamy served as Managing Director and CFO of Citadel Capital, a
leading private equity firm in Africa and in the Middle East. Prior to that, he served as Founder and CFO of Fayrouz
International, a company today fully owned by the Dutch beverage company Heineken. Mr. El-Shamy started his
career with Protector & Gamble where he rose to the role of Regional Finance Manager for their European Care
Operations based in Brussels. Mr. El-Shamy holds a BA degree from Helwan University.
Hamza Selim
Chief Destination Management Officer (until June 2013)
Egyptian national, born 1961, Prior to joining the Group in 2005, Mr. Selim worked extensively with Hyatt
Regency, serving as general manager for its Taba Heights property as well as area general manager for Egypt.
Other positions he held with Hyatt included regional director of marketing for the Middle East and general
manager for hotels in Jeddah and Dubai. Mr. Selim holds a Bachelor’s degree in business administration from
Cairo University, Egypt.
Raymond Cron
Mahmoud M. Zuaiter
Chief Operating Officer
Chief Hotel Officer
Swiss national, born 1959, Since 1989, Mr. Cron held top management positions in major construction
companies in Switzerland. In 1996 he was appointed managing director and member of the executive board
in a key Swiss construction enterprise. He was also Director General of the Federal Office of Civil Aviation
(FOCA) from 2004 to 2008. He joined the Group at the end of 2008. Until 2011, he was responsible
for all European projects with Orascom Development. As of 2012, Mr. Cron was promoted to Orascom
Development’s Chief Operating Officer. Mr. Cron graduated from the Swiss Federal Institute of Technology
(ETH) in Zurich and completed postgraduate studies in business management at BWI/ETH in Zurich.
* As of March 31, 2014 Dr. Niesslein has left the Company and the position of the CEO was taken over by the Chairman on an ad-interm basis
** As of August 31, 2013 Mr. El-Shamy has left the Company (also see below)
German national, born 1967, Mr. Zuaiter’s career spans 14 years of experience with the InterContinental
Hotels Group, culminating in the position of Director of Finance for the Middle East & Africa region. Mr.
Zuaiter joined the Group in 2004. Formerly CFO of Orascom Development for eight years, Mr. Zuaiter
was promoted to Chief Hotel Officer as of July 1, 2012. Educated in Germany, Mr. Zuaiter holds an MBA
degree from Columbus University and is a qualified financial accountant.
2013 Annual Report
Changes in the Executive Management in 2013
During 2013, three individuals left the Executive Management.
As of June 30, 2013, Mr. Cron stepped down from his position as Chief Operating Officer and left the Company.
Effective August 30, 2013, Mr. El-Shamy left the Company. His position as Chief Financial Officer was replaced by Mr. Tooma, member of the Board of
Directors, who was appointed by the Board of Directors to fill the Chief Financial Officer position on an ad interim basis.
In June 2013, Mr. Selim stepped down from the Executive Management and his position as Chief Destination Management Officer and assumed responsibility for the
Company’s subsidiary in the Sultanate of Oman as CEO of the respective subsidiary.
Other members of senior management
The following member of the Company’s senior management, although not a member of Executive Management, was regularly invited in 2013 to participate in
Executive Management meetings as a guest. As of December 31, 2013, he has left the Company:
Stuart N. Siegel
Real Estate Officer
American national, born 1955, Mr. Siegel joined the Group in 2012 as Chief Real Estate Officer overseeing the
Group`s real estate projects from El Gouna on the Red Sea in Egypt to Andermatt in the Swiss Alps. Mr. Siegel’s
primary career started at Sotheby’s International Realty, a subsidiary of Sotheby’s Holdings. He was appointed
President and CEO of the firm in 1999 and served on Sotheby’s Holding Worldwide Management Committee
(1999-2004) and on the North American Board of Directors (1994-2004). Mr. Siegel graduated from the
University of Virginia Graduate School of Architecture in Charlottesville, VA, USA.
5.5 Employees
As of December 31, 2013, the Company had 11,535 employees worldwide, of which 5,841 were in Egypt and 5,694 were in other countries. The number of
employees decreased by 2,105, compared to the end of 2012. This reduction in headcount of 2,105 employees is due to the political and economic situation in
2013 and the Company’s cost-cutting initiatives. The company considers its relations with the employees to be good.
79
5.6 Compensation, Shareholdings, and Loans
For detailed information on compensation paid to members of the Board of
Directors and to members of Executive Management for the financial year
2013, and on shares and options held by and loans granted to these persons
as of December 31, 2013, please refer to Note 12.1 (Board and Executive
Compensation Disclosures as Required by Swiss Law) of the consolidated
financial statements.
The compensation of the members of the Board of Directors and of Executive
Management is determined as specified below and it does not employ external
advisors or systematically use external benchmarks for fixing compensation..
Board of Directors. In respect to the compensation of members of the Board
of Directors for their service on the Board and on its committees, the Board
decided in 2008, in its discretion, on the amount of the annual remuneration per
member (CHF 160,000 for all Board members, except for the Lead Director in
whose case the amount is set at CHF 185,000), and on the form in which that
remuneration is discharged. It was decided that half the remuneration shall be
discharged in cash and half in the form of shares of the Company. This decision
of the Board of Directors, in which all Board members participated at the time,
remained in effect for the bonus payments for the financial year 2012 which
were paid out in 2013. However, in 2013, the Board decided to reduce the
compensation of the members of the Board of Directors from CHF 160’000
to CHF 130’000 for all members of the Board of Directors.
The shares of the Company allocated to the members of the Board of
Directors as compensation are, for that purpose, purchased by the Company
in the market, and their valuation (for purposes of the calculation of the number
of shares allocated to each member) is based on the average purchase price
paid by the Company for the shares.
Executive Management. Compensation of the members of Executive
Management for their service in Executive Management consists of a base
salary which is annually reviewed, and a bonus payment which is annually
determined, as further described below. The initial base salaries of the members
of Executive Management were either (in case of members who have served in
that capacity since the Company was formed in 2008) carried over from their
previous employment with Orascom Hotels & Development S.A.E., or (in case
of members appointed at a later time) they were determined in a discretionary
decision of the CEO together with the Nomination & Compensation Committee.
In respect to the annual salary review and bonus determination, the
Nomination & Compensation Committee discusses the proposals presented
by the CEO, approves them if deemed fit, and subsequently informs the Board
of Directors of its decisions. Members of Executive Management do not have
a right to attend meetings of the Nomination & Compensation Committee at
which decisions are taken in respect to their compensation, or otherwise to
participate in the decision process. In the year under review, there were no
changes in the base salaries of members of Executive Management.
Bonus: In late 2010, the Board of Directors approved a formal bonus policy
(“Policy”) for the Executive Management. Since 2010, the Policy applies to the
members of Executive Management.
For members of Executive Management, the Policy provides that their target
bonus lies in the range of 0-75% of their base salary, and that it may be paid
in cash or in the form of unrestricted shares of the Company (for 50% of the
bonus at most). Details in respect to compensation paid in the form of shares,
if any, remain to be defined upon individual agreement.
As the financial performance targets were not achieved in 2013 and due to
the challenging market environment, especially the political situation in Egypt,
the Nomination & Compensation Committee suggested to the complete
Board of Directors that no bonus shall be paid to the Executive Management
in 2013. The Board of Directors approved this suggestion for 2013 which was
accepted by the Members of the Executive Management.
2013 Annual Report
5.9 External Auditors
5.7 Shareholders’ Participation
Voting rights and representation restrictions
Agenda
Duration of the mandate and term of office of the lead auditor
With the exception of restrictions on the transferability of shares (ref. to Section
5.2. above), there are no limitations on voting rights. At a general meeting of
shareholders, each share entitles its owner to one vote. By means of a written
proxy, each shareholder may be represented by a third person who need not
himself be a shareholder.
Shareholders who represent shares with a par value of at least CHF
1,000,000 may request that an item be placed on the agenda. The request
must be communicated to the Board of Directors in writing, stating the item
to be placed on the agenda and the shareholder’s corresponding motion, at
least 45 days prior to the general meeting of shareholders.
Statutory quora
Record date for entry into the share register
According to Art. 10 of the Articles of Incorporation, the holders of at least
25 percent of issued shares must be present or represented at an ordinary
general meeting of shareholders for the meeting to be validly constituted.
Similarly, holders of at least 50 percent of issued shares must be present
or represented at an extraordinary general meeting of shareholders for the
meeting to be validly constituted.
In order to be entitled to participate at the 2013 ordinary general meeting
of shareholders, a holder of registered shares need be inscribed in the share
register as a shareholder with voting rights by April, 30, 2014.
Since the foundation of the Company on January 17, 2008, Deloitte AG, Zurich,
has been the statutory auditor with responsibility for the audit of the Company’s
non-consolidated and consolidated financial statements. The Company’s
subsidiary OHD is audited by Deloitte Saleh, Barsoum & Abdel Aziz, Cairo. The
auditor in charge for the Company at Deloitte AG, Roland Muller, as of the 2013
finance year. A rotation cycle of 7 years is foreseen for the position of the auditor
in charge. The Board of Directors will propose to the ordinary general meeting
of shareholders on May 12, 2014 to re-elect Deloitte AG, Zurich as the statutory
auditor for the 2014 financial year.
Resolutions are generally passed, in the case of an ordinary general meeting
of shareholders (except for matters subject to a higher majority requirement
by law), with the absolute majority of the shares represented. In the case of
an extraordinary general meeting of shareholders, resolutions are generally
passed with a majority of two-thirds of the shares represented.
Resolutions relating to the following matters, however, require a majority of 75
percent of shares represented at the meeting: (a) capital increases pursuant
to Art. 650 CO and reductions of the share capital pursuant to Art. 732
CO; (b) dissolving the Company before its termination date or changing its
duration (which, pursuant to the Articles of Incorporation, is 99 years from its
formation); (c) changing the Company’s purpose; and (d) any merger with
another company.
Auditing fees
Deloitte received the following fees for its services as the statutory auditor of
the Company and the majority of Orascom Development companies on the
one hand, and for non-audit services on the other hand:
5.8 Changes of Control and
defense measures
In CHF
Audit Services
2013
2012
1,714,580
2,202,814
1,714,580
2,202,814
Additional services
Thereof Tax Services
Thereof Public Offering
Duty to make an offer
The Articles of Incorporation do not provide for any “opting out” or “opting
up” arrangements within the meaning of Art. 22 and Art. 32 SESTA.
Thereof Other services
Total Fees
Convocation of the general meeting of shareholders
Clauses of change of control
Informational instruments pertaining to the external audit
An ordinary general meeting of shareholders is to be held annually following
the close of the financial year. It is called by the Board of Directors or, if
necessary, by the auditors. Extraordinary general meetings may be called by
the Board of Directors, the auditors, the liquidators, or by the general meeting
of shareholders itself.
No change of control clauses have been agreed upon.
The Board of Directors’ Audit Committee has the task of ensuring the
effective and regular supervision of the statutory auditors’ reporting with
the aim of ensuring its integrity, transparency and quality.
One or more shareholders representing at least 10 percent of the share
capital may request in writing that the Board of Directors call an extraordinary
general meeting of shareholders. The request must state the purpose of the
meeting and the agenda to be submitted. General meetings of shareholders
are held at the statutory seat of the Company or at such other place as
determined by the Board of Directors.
Notice of a general meeting of shareholders is given by means of a
single publication in the Swiss Commercial Gazette (Schweizerisches
Handelsamtblatt) or by registered letter to the shareholders of record.
There must be a time period of not less than 20 days between the day of the
publication or the mailing of the notice and the scheduled date of the meeting.
The notice of the general meeting of shareholders must indicate the agenda
and the motions by the Board of Directors.
81
In advance of each financial year, the proposed auditing schedule is
presented to and discussed with the Audit Committee. After each audit,
important observations by the statutory auditor, together with appropriate
recommendations, are presented to the Audit Committee (after
discussions with the CFO) during its relevant meeting. Subsequently,
members of the Audit Committee receive the statutory auditors’
management letter in final form. During the year, the statutory auditor is
in regular contact with the chairman of the Audit Committee to discuss
matters arising in the performance of its task.
Based on these communications the Audit Committee discusses its impression
of the integrity and effectiveness of the statutory auditors’ work, and issues a
recommendation to the Board of Directors concerning the proposal to the
general meeting of shareholders whether to re-elect the statutory auditors
for the following year. In its assessment, the Audit Committee places
particular value on demonstrated independence and willingness to identify
and challenge assumptions underlying the financial reporting, and the timely
completion of audits permitting the Company to comply with its reporting
obligations and its corporate communications calendar.
In the year under review, representatives of the statutory auditor participated
in all five Audit Committee meetings.
2013 Annual Report
5.10 Information Policy
The CEO, the CFO, and the Investor Relations Department took care of
the communication with investors during 2013. The company intends to
update the financial community through personal contacts, discussions, and
presentations held through various road shows and investor conferences.
Orascom Development is committed to an open information policy and
provides shareholders, the capital market, employees and all stakeholders
with open, transparent and timely information. The information policy
accords with the requirements of the Swiss stock exchange as well as the
relevant statutory requirements. As a company listed on SIX Swiss Exchange,
Orascom Development also publishes information relevant to its stock price
in accordance with Art. 53 of the Listing Rules (ad hoc publicity).
The financial reporting system is comprised of quarterly, interim (semiannual), and annual reports. Consolidated financial statements are prepared
in accordance with International Financial Reporting Standards (IFRS) in
compliance with Swiss law and the rules of the SIX Swiss Exchange.
In addition, the Company utilizes electronic news releases to report the latest changes
and developments to ensure equal treatment for all capital market participants.
Corporate Calendar
Annual general meeting of shareholders:
First quarter 2014 results:
Second quarter 2014 results:
Third quarter 2014 results:
May 12, 2014
May 28, 2014
Aug. 26, 2014
Nov. 25, 2014
Further information and contact
Investors and other interested stakeholders can find further information on
Orascom Development online at www.orascomdh.com.
Stakeholders may subscribe to the Company’s e-mail alert service to receive
news releases at www.orascomdh.com/en/media-center/news-alert.html
Investors may also contact the Investor Relations Department as follows:
Sara El Gawahergy
Investor Relations Director
T. : +2 022 461 8961
T. : +4 141 874 17 11
ir@orascomdh.com
83
2013 Annual Report
85
6. Investor Information
Introduction
Orascom Development Holding AG has a dual listing with its primary listing on the main board of the SIX Swiss Exchange. The secondary listing is in the form
of Egyptian Depository Receipts (EDRs) on the EGX Egyptian Exchange.
Overview
31/12/2013
31/12/2012
Per share data 1
Switzerland
Share price at year-end (in CHF)
14.55
12.65
12,472,189
12,860,045
Highest share price during the year (in CHF)
17.50
21.10
Dispo shares
5,201,603
5,514,015
Lowest share price during the year (in CHF)
7.30
11.50
Number of traded shares (in million)
8.36
5.61
98.90
89.89
Average number of traded shares per day
33,584
22,421
Average traded value per day (in CHF)
397,181
358,434
31/12/2013
31/12/2012
6.12
4.36
Share equivalents in custody of MCDR’s depositary bank (EDRs)
Shares in custody of MCDR (Not Traded)
Total Shares
Market capitalization (in CHF billion)
Share information 1
Shares listing
Number of shares
9,993,939
9,048,227
875,416
1,120,860
28,543,147
28,543,147
00.42
0.36
Value of traded shares (in CHF million)
1 Source: Bloomberg
Per EDR data1
EDRs information 1
Zurich, Switzerland
17,673,792
EDRs listing
Number of EDRs 2
Market price at year-end (in EGP)
Cairo, Egypt
199,878,780
Highest market price during the year (in EGP)
8.39
7.08
Lowest market price during the year (in EGP)
3.00
3.91
85.62
16.62
522.66
85.76
358,226
72,568
2,186,843
350,021
ISIN code
CH0038285679
ISIN code
EGG676K1D011
Currency
Swiss Franc
Currency
Egyptian Pound
Ticker code (Bloomberg)
ODHN:SW
Ticker code (Bloomberg)
ODHN:EY
Value of traded EDRs (in EGP million)
Ticker code (Reuters)
ODHN.CA
Average number of traded EDRs per day
Ticker code (Reuters)
2
31/12/2012
Shares held with SIS and registered in the share register
Egypt
1
31/12/2013
ODHN.S
Number of traded EDRs (in million)
Average traded value per day (in EGP)
As at end of 2013.
Implying a conversion ratio of 20:1, where 20 EDRs are equivalent to 1 registered share.
1
Source: Bloomberg
2013 Annual Report
6. Shareholding Structure
A) Shares
B) EDRs
Shareholders by type
EDRs holders by type
Categories
Number of shareholders
Number of shares
3,576
7,956,120
Legal persons
72
3,591,358
Banks
22
618,209
Banks
Investment trusts
17
265,615
Pension funds
11
33,695
Natural persons
Foundations
Total
2
6,092
3,702
12,472,189
Shareholders by country
Country
Number of EDRs holders
Number of EDRs
3,769
167,593,166
27
28,870,439
3
1,557,980
Foundations
5
956,610
Investment trusts
7
900,585
Natural persons
Legal persons
Pension funds
Total
Number of shares
6
6,082,169
Egypt
3,645
2,579,278
Cayman Islands
1
2,071,640
United Kingdom
6
507,129
1
Switzerland
Greece
-
-
3,811
199,878,780
EDRs holders by country
Egypt
Country
Number of EDRs
3,735
164,824,470
United Kingdom
10
22,213,034
Saudi Arabia
19
11,630,264
Palestine
9
467,653
500,444
Germany
3
270,000
2
333,428
Syria
United States of America
4
284,652
Jordan
United Arab of Imarets
2
48,380
Germany
13
20,443
Luxembourg
1
14,500
Austria
4
11,520
Netherlands
1
8,371
Malta
1
Singapore
2
Italy
3
143,129
10
77,292
Canada
1
58,600
Bahrain
2
52,948
Netherlands
2
42,200
United States of America
4
32,331
Sweden
1
20,000
3,000
Lebanon
3
14,236
1,800
Malaysia
1
9,100
1
1,620
Oman
1
8,240
France
3
1,135
Italy
1
7,250
Thailand
1
810
United Arab of Emirates
2
3,819
Brazil
2
800
Austria
1
3,000
Bahamas
1
500
Thailand
1
1,060
Liechtenstein
3
270
India
1
150
Spain
1
200
Switzerland
1
4
Saudi Arabia
1
100
Total
3,811
199,878,780
3,702
12,472,189
Number of shares
Number of EDRs
1
10
350
2,396
1
10
153
251
11
100
1,229
68,976
11
100
110
6,370
101
1,000
1,727
680,992
101
1,000
1,086
665,774
1,001
10,000
350
931,045
1,001
10,000
1,902
7,478,418
14,405,843
10,001
100,000
38
968,478
10,001
100,000
494
100,001
1,000,000
6
1,833,267
100,001
1,000,000
58
12,359,570
1,000,001
999,999,999
2
7,987,035
1,000,001
999,999,999
8
164,962,554
3,702
12,472,189
3,811
199,878,780
Total
Distribution of registered shares/EDRs as at 31 December 2013.
Total
2013
2012
Number of shares
issued
Percentage of
ownership (%)
Number of shares
issued
Percentage of
ownership (%)
Samih Sawiris 2
17,9 14,355
62.76
17,907,121
62.74
Janus Capital Management LLC
1,623,250
5.69
1,542,643
5.40
9,005,542
31.55
9,093,383
31.86
28,543,147
100.00
28,543,147
100.00
Others
1 Overview of significant shareholders as at 31 December 2013.
2 The shares of Samih O. Sawiris are held directly and through his entities Thursday Holding (former TNT Holding) and SOS Holding.
Corporate Calendar
Date
Event
12 May 2014
6th Annual General Meeting of Shareholders
28 May 2014
First Quarter 2014 results
26 August 2014
25 November 2014
Research coverage
Goldman Sachs
Eyad R. Faraj
Eyad.faraj@gs.com
Distribution of EDRs holders 1
Distribution of shareholdings 1
Name of major shareholders
Total
Belgium
Total
1
Categories
Significant shareholders 1
Bank J. Safra Sarasin Ltd
Patrick Hasenböhler
Patrick.hasenbohler@safrasarasin.com
UBS
Andre Rudolf von Rohr
Andre.rudolf-von-rohr@ubs.com
Half-year 2014 results
Nine-months 2014 results
Naeem Holding
Harshjit Oza
Harshjit.oza@naeemholding.com
Investor Contacts
Sara El Gawahergy
Investor Relations Director
Tel: + 2 02 246 18961
Tel: + 4 14 187 41711
ir@orascomdh.com
For publications and further information visit
http://www.orascomdh.com/en/investor-relations
87
7. Financial Statements
2013 Annual Report
89
2013 Annual Report
F-1 Orascom Development
Contents
Orascom Development Holding AG (consolidated financial statements)
Consolidated statement of comprehensive income
F-3
Consolidated statement of financial position
F-5
Consolidated statement of changes in equity
F-7
Consolidated statement of cash flows
F-8
Notes to the consolidated financial statements
F-10
Income statement
F-89
Statutory balance sheet
F-90
Statement of changes in equity
F-91
Cash flow statement
F-92
Notes to the financial statements
F-93
Orascom Development
Holding
Consolidated financial statements
together with auditor's report for the
year ended 31 December 2013
F-2
2013 Annual Report
Consolidated statement of comprehensive income for the year ended 31 December
2013
CHF
CONTINUING OPERATIONS
Revenue
Cost of sales
Notes
6/7
7.2
9
10
8
11
20
(LOSS)BEFORE TAX
Income tax expense
CHF
13
LOSS FOR THE YEAR FROM CONTINUING
OPERATIONS
Basic
15
(5.54)
(3.41)
Diluted
15
(5.54)
(3.41)
6,468,078
23,431,929
Earnings per share from continuing operations
Basic
15
(5.29)
(3.02)
Diluted
15
(5.29)
(3.02)
5,372,970
(39,339,604)
(70,755,383)
(31,025,518)
(10,464,453)
5,620,401
(32,547,229)
(66,281,028)
(8,592,264)
(907,733)
(139,743,910)
(79,275,924)
(20,702,988)
(11,118,118)
(160,446,898)
(90,394,042)
14
(7,012,723)
(11,023,986)
(167,459,621)
(101,418,028)
(3,603,067)
17,245,804
Other comprehensive income, net of income tax
Items that may be reclassified subsequently
to profit or loss
Exchange differences arising on translation of foreign
operations
Net gain on hedging instruments entered into for cash flow
hedges
Total other comprehensive income for the year,
net of tax
Total comprehensive income for the year
40
685,790
(106,410)
(2,917,277)
17,139,394
(49,234,328)
(40,803,196)
372,931
562,076
(48,861,397)
(40,241,120)
(51,778,674)
(23,101,726)
(219,238,295)
(124,519,754)
(157,786,634)
(9,672,987)
(97,271,213)
(4,146,815)
(167,459,621)
(101,418,028)
(196,713,736)
(22,524,559)
(113,476,579)
(11,043,175)
(219,238,295)
(124,519,754)
(Loss) attributable to:
Owners of the Parent Company
Non-controlling interests
Total comprehensive income attributable to:
Owners of the Parent Company
2012
Restated
271,795,861
(248,363,932)
Samih Sawiris
Chairman
LOSS FOR THE YEAR
Items that will not be reclassified subsequently
to profit or loss
Net Gain/(loss) on revaluation of financial assets at
FVTOCI
Remeasurement of defined benefit obligation
2013
221,379,382
(214,911,304)
DISCONTINUED OPERATIONS
(Loss) for the year from discontinued operations
Notes
Earnings per share from continuing and
discontinued operations
GROSS PROFIT
Investment income
Other gains and losses
Administrative expenses
Finance costs
Share of losses of associates
2012
Restated
2013
Consolidated statement of comprehensive income for the year ended 31 December
2013
Eskandar Tooma
Group CFO
F-4
2013 Annual Report
Consolidated statement of financial position at 31 December 2013
Consolidated statement of financial position at 31 December 2013
CHF
Notes
31 December
2013
31 December 2012
Restated
1 January 2012
Restated
CHF
ASSETS
Property, plant and equipment
16
766,992,221
1,002,981,620
969,362,187
Investment property
17
9,986,618
78,903,321
76,366,131
Goodwill
18
6,553,348
7,331,756
7,951,210
Investments in associates
20
103,633,179
18,852,835
29,349,124
Non-current receivables
21
32,609,555
74,119,839
89,167,880
Non-current receivable due from related parties
44
-
2,140,680
137,143
Deferred tax assets
13.4
15,679,458
31,097,243
30,823,446
Finance lease receivables
25
-
17,742,084
12,760,423
Other financial assets
22
25,826,471
54,319,056
39,609,291
961,280,850
1,287,488,434
1,255,526,835
TOTAL NON-CURRENT ASSETS
CURRENT ASSETS
1 January 2012
Restated
Issued capital
29
662,201,010
662,201,010
662,201,010
Reserves
30
(178,223,017)
(149,503,893)
(134,983,659)
Retained earnings
31
58,815,939
227,635,661
325,710,287
542,793,932
740,332,778
852,927,638
218,974,712
235,883,784
240,823,907
761,768,644
976,216,562
1,093,751,545
Equity attributable to owners of the
Parent Company
NON-CURRENT LIABILITIES
Borrowings
33
210,666,616
279,376,296
254,353,148
Trade and other payables
34
25,708,424
32,139,626
31,717,802
40
977,640
2,604,653
2,023,255
3,281,431
3,688,597
5,797,662
357,317,055
499,127,430
478,154,600
Retirement benefit obligation
Trade and other receivables
24
52,204,925
90,265,697
133,567,041
Notes payable
25
-
4,376,243
3,214,009
Current receivables due from related parties
44
17,115,813
17,500,946
22
463
Other current assets
26
Cash and bank balances
27
28
32
Total equity
23
TOTAL ASSETS
31 December 2012
Restated
CAPITAL AND RESERVES
Inventories
TOTAL CURRENT ASSETS
31 December
2013
EQUITY AND LIABILITIES
NON-CURRENT ASSETS
Non-current assets held for sale
Not
es
Deferred tax liabilities
13.4
40,967,859
40,360,551
36,396,168
45,218,733
Other financial liabilities
35
72,931
13,121,891
14,018,690
8,249,157
14,557,520
Total non-current liabilities
281,974,901
371,291,614
344,306,725
61,706,893
74,015,193
73,719,589
73,310,785
101,668,196
79,399,104
561,655,934
795,202,862
827,830,596
149,783,206
-
-
711,439,140
795,202,862
827,830,596
1,672,719,990
2,082,691,296
2,083,357,431
CURRENT LIABILITIES
34
30,124,918
49,984,236
57,631,059
Borrowings
33
197,906,439
324,484,554
281,857,673
Due to related parties
44
15,970,895
17,081,959
5,760,784
Current tax liabilities
13.3
2,730,298
5,187,962
6,133,481
Other financials liabilities
35
11,418,524
-
-
Provisions
36
95,605,112
79,106,988
90,144,020
Other current liabilities
37
195,816,848
259,337,421
203,772,144
549,573,034
735,183,120
645,299,161
79,403,411
-
-
628,976,445
735,183,120
645,299,161
910,951,346
1,106,474,734
989,605,886
1,672,719,990
2,082,691,296
2,083,357,431
Liabilities directly associated with non-current
assets held for sale
Total current liabilities
Total liabilities
Total equity and liabilities
Samih Sawiris
Chairman
28
Eskandar Tooma
Group CFO
F-6
2013 Annual Report
761,768,644
218,974,712
542,793,932
(2,114,229)
(10,788,090)
Balance at 31 December 2013 (note 30)
662,201,010
243,799,019
(8,499,885)
(76,938)
4,916,868
(283,710,189)
(121,749,573)
58,815,939
-
4,790,377
5,615,487
(825,110)
Non-controlling interests’ share in equity of consolidated
subsidiaries
-
-
-
-
-
-
(825,110)
-
517,334
-
-
517,334
(374,489)
-
(11,344,389)
-
-
-
11,344,389
-
-
891,823
Losses from sale of financial assets at FVTOCI
Distribution of treasury shares
-
-
-
(517,334)
-
(517,334)
-
-
-
8,106,066
-
-
-
-
-
-
-
(517,334)
-
-
(8,106,066)
-
Acquisition of treasury shares
(36,382,756)
(3,603,067)
372,931
Treasury shares received from equity swap settlement
(51,778,674)
(219,238,295)
(22,524,559)
(196,713,736)
(167,459,621)
-
(157,100,844)
(12,851,572)
(38,927,102)
(3,603,067)
Other comprehensive income for the year, net of income tax
-
-
-
372,931
-
(36,382,756)
-
685,790
976,216,562
235,883,784
(9,672,987)
(157,786,634)
740,332,778
-
(157,786,634)
(10,220,295)
-
-
(18,529,412)
-
-
(768,308)
243,799,019
Loss for the year
Balance at 1 January 2013 (note 30)
662,201,010
(449,869)
4,916,868
(247,327,433)
(120,924,463)
227,635,661
976,216,562
235,883,784
740,332,778
(10,220,295)
(18,529,412)
(768,308)
243,799,019
Balance at 31 December 2012 (restated)
662,201,010
(449,869)
4,916,868
(247,327,433)
(120,924,463)
227,635,661
6,396,215
588,556
-
6,103,052
293,163
588,556
-
-
-
293,163
-
-
-
-
1,285,559
Non-controlling interests’ share in equity of consolidated
subsidiaries
Distribution of treasury shares
-
-
17,245,804
-
-
-
562,076
-
(33,906,836)
-
(697,003)
(23,101,726)
(124,519,754)
(11,043,175)
(113,476,579)
(101,418,028)
-
(97,377,623)
(6,896,360)
(4,146,815)
(97,271,213)
(16,205,366)
(106,410)
(97,271,213)
-
-
-
(33,906,836)
-
-
-
17,245,804
-
562,076
-
-
-
Loss for the year
-
852,927,638
325,710,287
Balance at 1 January 2012 (restated)
Other comprehensive income for the year, net of income tax
(1,465,339)
1,093,751,545
1,095,216,884
240,823,907
(1,465,339)
854,392,977
(1,465,339)
327,175,626
(10,220,295)
(121,217,626)
(213,420,597)
4,916,868
(35,775,216)
(1,011,945)
(2,053,867)
243,799,019
662,201,010
Balance at 1 January 2012 (as previously reported)
Adjustment due to application of amended Standard (note 2.1)
Foreign
currency
translation
reserve
General
reserve
Investments
revaluation
reserve
Hedging
reserve
Treasury
shares
Share
premium
Issued
Capital
CHF
Consolidated statement of changes in equity for the year ended 31 December 2013
Reserve from
common control
transactions
Equity swap
settlement
Retained
earnings
Attributable to
owners of the
Parent
Company
Non-controlling
interests
Total
Consolidated cash flow statement for the year ended 31 December 2013
CHF
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss) for the year
Adjustments for:
Income tax expense recognized in profit or loss
Share of losses of associates
Finance costs recognized in profit or loss
Investment income recognized in profit or loss
Write down on inventory
Impairment loss on receivables and other current assets
Reversal of impairment loss on trade receivables
Impairment loss on property, plant and equipment
Gain on sale or disposal of property, plant and equipment
Gain on revaluation of investment properties
Loss on reclassification of subsidiaries as disposal group
(Gain) on disposal of subsidiaries
(Gain)/loss on deemed disposal of subsidiary
Impairment losses in relation to investments in associates
Depreciation and amortization of non-current assets
Net foreign exchange losses
MOVEMENTS IN WORKING CAPITAL
Decrease in trade and other receivables
Decrease/(Increase) in finance lease receivables
(Increase) in inventories
(Increase)/decrease in other assets
(Decrease) in trade and other payables
Increase/(decrease) in provisions
Increase in other liabilities
Cash generated from/(used in) operations
Interest paid
Income tax paid
Net cash (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds on sale of financial assets (FVTOCI)
Payments to acquire financial assets
Proceeds on sale of financial assets (FVTPL)
Payments to acquire equity investments
Proceeds on disposal of subsidiary
Dividends received
Interest received
Net cash outflow on deconsolidated subsidiaries
Net cash (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from distribution of shares
Payment for treasury shares
Non controlling interests shares in changes of equity for
consolidated subsidiaries
Repayment of borrowings
Proceeds from borrowings
Net cash generated by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balance of cash held
in foreign currencies
Cash and cash equivalents at the end of the year
Notes
13.1
20
11
9
23
42.11
24
10/16
10
17
10/38
10/38
39
10/20
16
16
22
22
39
38
9
38/39
2013
(167,459,621)
(101,418,028)
19,647,245
10,464,453
31,025,518
(5,372,970)
4,896,555
1,008,962
15,139,935
(615,377)
(1,283,684)
2,271,486
(306,553)
(221,544)
4,608,936
30,132,283
13,466,333
10,073,093
907,733
8,925,935
(5,638,592)
20,739,967
(2,059,010)
(390,539)
(3,951,870)
(4,356,370)
1,992,741
18,582,682
34,492,359
9,892,170
14,824,003
2,483,457
(76,399,284)
(8,318,516)
(4,676,993)
22,904,978
83,673,325
(8,107,073)
(39,191,525)
(4,905,154)
(52,203,752)
10,609,005
(7,388,416)
(24,442,248)
17,839,919
(8,166,320)
(6,919,075)
68,336,709
37,661,845
(46,812,129)
(5,381,121)
(14,531,405)
(39,790,000)
2,107,413
23,951,935
(2,488,098)
6,661,656
(5,000,000)
2,935,240
5,372,970
(7,700,668)
(13,949,552)
(104,131,640)
6,700,578
7,294,817
(291,121)
(5,600,000)
105,906
5,532,686
(676,852)
(91,065,626)
(517,334)
4,790,377
(42,064,243)
87,509,726
49,718,526
(16,434,778)
101,668,196
(3,982,202)
27
2012 (Restated)
81,251,216
588,556
11,216,699
(22,661,676)
142,239,779
131,383,358
25,786,327
79,399,104
(3,517,235)
101,668,196
F-8
2013 Annual Report
Index to the notes to the consolidated financial statements
1
2
3
4
5
Page
General information
Application of new and revised International Financial Reporting Standards
Significant accounting policies
Critical accounting judgments and key sources of estimation uncertainty
The group and major changes in group entities
10
10
14
27
31
6
7
8
9
10
Revenue
Segment information
Employee benefits expense
Investment income
31
31
35
36
36
11
12
13
14
15
Finance costs
Compensation of key management personnel
Income taxes relating to continuing operations
Discontinued operations
Earnings per share
37
37
40
42
43
16
17
18
19
20
Investment property
Goodwill
Subsidiaries
Investments in associates
44
46
46
48
51
21
22
23
24
Inventories
53
53
54
55
25
26
27
28
29
Cash and cash equivalents
Capital
55
56
57
58
59
30
31
32
33
34
Reserves (net of income tax)
Retained earnings and dividends on equity instruments
Borrowings
60
63
63
63
64
35
36
37
38
39
Other financial liabilities
Provisions
Disposal of a subsidiary
Deemed loss of control of subsidiary
65
66
67
67
68
40
41
42
43
44
Retirement benefit plans
Risk assessment disclosure required by Swiss law
Financial instruments
Share-based payments
Related party transactions
70
72
73
79
80
45
46
47
48
Non-cash transactions
Operating lease arrangements
Commitments for expenditure
Litigation
82
82
83
84
49
50
51
Other significant events that occurred during the reporting period
Subsequent events
Approval of financial statements
85
86
86
Notes to the consolidated financial
statements for the year ended 31
December 2013
1 GENERAL INFORMATION
Orascom Development Holding AG (“ODH” or “the Parent Company”), a limited company incorporated in Altdorf, Switzerland, is a public
company whose shares are traded on the SIX Swiss Exchange. In addition, Egyptian Depository Receipts (“EDRs”) of the Parent Company
are traded at the EGX Egyptian Exchange. One EDR represents 1/20 of an ODH share.
The Company and its subsidiaries (the “Group”) is a leading developer of fully integrated towns that include hotels, private villas and
apartments, leisure facilities such as golf courses, marinas and supporting infrastructure. The Group’s diversified portfolio of projects is
spread over eight jurisdictions, with primary focus on touristic towns and recently affordable housing. The Group currently operates in Egypt,
Jordan, UAE, Oman, Morocco, United Kingdom and Montenegro and is continuously seeking development opportunities in untapped yet
attractive locations all over the world. The Group has four existing projects: El Gouna, the flagship project, a fully-fledged town on the Red
Sea coast (Egypt); Taba Heights, on the Sinai Peninsula (Egypt), the Group’s second tourism destination following El Gouna’s business model;
the Cove (Ras Al Khaimah, UAE), the Group’s first development experience outside Egypt; and Haram City, an integrated town dedicated to
affordable housing in Egypt, catering for the mass population. In June 2013 the Group lost control over its operating companies in
Switzerland but still holds a 49% interest in these companies and consequently shows the investments as associates (refer to note 39 for
further details).
The addresses of its registered office and principal place of business are disclosed in the introduction to the annual report.
2 Application of new and revised International Financial Reporting
Standards (“IFRSs”)
2.1 New and revised IFRSs affecting amounts reported in the current year and prior
years
The following new and revised Standards and Interpretations have been applied in the current period and have affected these financial
statements. Details of other new and revised IFRSs applied in these financial statements that have had no material effect on the financial
statements are set out in note 2.2:
IAS 19 Employee Benefits – Amended Standard resulting from the Post-Employment Benefits and Termination Benefits projects
The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence
eliminate the “corridor approach”' permitted under the previous version of IAS 19 and used by theGroup. The amendments also accelerate
the recognition of past service costs.
Due to the amendments the Group needs to recognize all actuarial gains and losses immediately through other comprehensive income in
order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan
deficit or surplus.
Another significant change to IAS 19 relates to the presentation of changes in defined benefits obligations and plan assets with changes being
split into three components:
•
Service cost – recognised in profit or loss and includes current and past service cost as well as gains or losses on settlements.
•
Net interest – recognised in profit or loss and calculated by applying the discount rate at the beginning of the reporting period to the net
defined benefit liability or asset at the beginning of each reporting period.
•
Remeasurement – recognized in other comprehensive income and comprises actuarial gains and losses on the defined benefit
obligation, the difference of the actual return on plans assets over the change in plan assets due to the passage of time andthe changes, if
any, due to the impact of the asset ceiling.
F-10
2013 Annual Report
As a result, the profit or loss no longer includes an expected return on plan assets, instead, imputed finance income is calculated on the plan
assets and is recognised as part of the net interest cost in profit or loss. Any actual return above or below the imputed finance income on plan
assets is recognised as part of remeasurement in other comprehensive income.
As the amended requirements of IAS 19 need to be applied retrospectively, the initial application of IAS 19 (revised) impacts the financial
statements as follows:
CHF
IAS 19 (2004)
Adjustment
IAS 19 (2011)
Retirement Benefit Obligation
As at 1 January 2012
416,295
1,606,960
2,023,255
As at 1 January 2013
871,355
1,733,298
2,604,653
Expenses recognised in profit or loss
1 January 2012 – 31 December 2012
1,285,249
63,648
1,348,897
of which recognized within continuing operations
677,877
55,817
733,694
of which recognized within discontinued operations
607,372
7,831
615,203
-
62,690
62,690
Actuarial loss recognised in OCI
1 January 2012 – 31 December 2012
The above adjustments lead to an increase in deferred tax assets of CHF 141,621 as at 1 January 2012 and CHF 98,200 as at 1 January 2013
respectively.
The above changes did not have a noticeable impact on reported earnings per share as at 31 December 2012.
2.2 New and revised IFRSs applied with no material effect on the consolidated
financial statements
Amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities
The Group has applied the amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities for the first time in the
current year. The amendments to IFRS 7 require entities to disclose information about rights of offset and related arrangements (such as
collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.
The amendments have been applied retrospectively. As the Group does not have any offsetting arrangements in place, the application of the
amendments has had no impact on the disclosures or on the amounts recognised in the consolidated financial statements.
New and revised Standards on consolidation, joint arrangements, associates and disclosures
In May 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued comprising IFRS 10
Consolidated financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 (as revised in 2011)
Separate Financial Statements and IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures. Subsequent to the issue of these
standards, amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to clarify certain transitional guidance on the first-time application of the
standards.
In the current year, the Group has applied for the first time IFRS 10, IFRS 11, IFRS 12 and IAS 28 (as revised in 2011) together with the
amendments to IFRS 10, IFRS 11 and IFRS 12 regarding the transitional guidance. IAS 27 (as revised in 2011) is not applicable to the Group as
it deals only with separate financial statements.
The impact of the application of these standards is set out below:
Impact of the application of IFRS 10
IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements and
SIC-12 Consolidation – Special Purpose Entities. IFRS 10 changes the definition of control such that an investor has control over an investee
when a) it has power over the investee, b) it is exposed, or has rights, to variable returns from its involvement with the investee and c) has the
ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously,
control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
Additional guidance has been included in IFRS 10 to explain when an investor has control over an investee. Some guidance included in IFRS
10 that deals with whether or not an investor that owns less than 50% of the voting rights in an investee has control over the investee is
relevant to the Group.
The application of IFRS 10 has had no impact on the consolidated financial statements.
As the Group does not have any investments in joint arrangements, the application of IFRS 11 has had no impact on the consolidation financial
statements.
IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or
unconsolidated structured entities. In general, the application of IFRS 12 has resulted in more extensive disclosures in the consolidated
IFRS 13 Fair Value Measurement
The Group has applied IFRS 13 for the first time in the current year. IFRS 13 established a single source of guidance for fair value
measurements and disclosures about fair value measurements. The scope of IFRS 13 is broad; the fair value measurement requirements of
IFRS 13 apply to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value
measurements and disclosures about fair value measurements, except for share-based payment transactions that are within the scope of IFRS
2 Share-based Payment, leasing transactions that are within the scope of IAS 17 Leases, and measurements that have some similarities to fair
value but are not fair value (e.g. net realisable value for the purposes of measuring inventories or value in use for impairment assessment
purposes).
IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the
principal (or most advantageous) market at the measurement date under current market conditions. Fair value under IFRS 13 is an exit price
regardless of whether that price is directly observable or estimated using another valuation technique. Also, IFRS 13 includes extensive
disclosure requirements.
IFRS 13 requires prospective application from 1 January 2013. In addition, specific transitional provisions were given to entit ies such that they
need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial
application of the Standard. In accordance with these transitional provisions, the Group has not made any new disclosures required by IFRS
13 for the 2012 comparative period. Other than the additional disclosures, the application of IFRS 13 has not had any material impact on the
amounts recognised in the consolidated financial statements.
Amendments to IAS 1 Presentation of Items of Other Comprehensive Income
The Group has applied the amendments to IAS 1 Presentation of Items of Other Comprehensive Income for the first time in the current year.
The amendments introduce new terminology, whose use is not mandatory, for the statement of comprehensive income and income statement.
The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two
separate but consecutive statements.
Further, the amendments to IAS 1also require items of other comprehensive income, in the other comprehensive income section, to be
grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified
subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be
allocated on the same basis. Management considered the latter amendments in preparing the Group’s consolidated statement of
comprehensive income for the year ending 31 December 2013 and has retrospectively restated its 2012 comparatives on the same basis.
2.3 Standards and Interpretations in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not adopted the following Standards and Interpretations that have
been issued but are not yet effective. They will be effective on or after the dates described below.
New, amended and revised Standards and Interpretations
effective from
IFRS 10
Annual periods beginning on or
after 1 January 2014
The amendments to IFRS 10 introduce an exception to consolidating subsidiaries for an
investment entity, except where the subsidiaries provide services that relate to the
investment entity’s investment activities. Under the amendments to IFRS 10, an
investment entity is required to measure its interests in subsidiaries at fair value through
profit or loss. To qualify as an investment entity, certain criteria have to be met.
Specifically, an entity is required to:
obtain funds from one or more investors for the purpose of providing them with
professional investment management services;
commit to its investor(s) that its business purpose is to invest funds solely for returns
from capital appreciation, investment income, or both; and
measure and evaluate performance of substantially all of its investments on a fair
value basis.
Consequential amendments to IFRS 12 and IAS 27 (as revised in 2011) have been made
F-12
2013 Annual Report
3 SIGNIFICANT ACCOUNTING POLICIES
to introduce new disclosure requirements for investment entities.
IAS 19
Amends IAS 19 Employee Benefits to clarify the requirements that relate to how
contributions from employees or third parties that are linked to service should be
attributed to periods of service. In addition, it permits a practical expedient if the amount
of the contributions is independent of the number of years of service, in that
contributions, can, but are not required, to be recognised as a reduction in the service
cost in the period in which the related service is rendered.
after 1 July 2014
IAS 32
The amendments to IAS 32 clarify existing application issues relating to the offset of
financial assets and financial liabilities requirements. Specifically, the amendments
clarify the meaning of ‘currently has a legally enforceable right of set-off’ and
‘simultaneous realisation and settlement’.
IAS 36
The amendments to IAS 36 reduce the circumstances in which the recoverable amount
of assets or cash-generating units is required to be disclosed, clarify the disclosures
required, and introduce an explicit requirement to disclose the discount rate used in
determining impairment (or reversals) where recoverable amount (based on fair value
less costs of disposal) is determined using a present value technique.
The amendments to IAS 39 make it clear that there is no need to discontinue hedge
accounting if a hedging derivative is novated, provided certain criteria are met. A
novation indicates an event where the original parties to a derivative agree that one or
more clearing counterparties replace their original counterparty to become the new
counterparty to each of the partiers. In order to apply the amendments and continue
hedge accounting, novation to a central counterparty must happen as a consequence of
laws and regulations or the introduction of laws or regulations.
IFRIC 21 provides guidance on when to recognise a liability for a levy imposed by a
government, both for levies that are accounted for in accordance with IAS 37
Provisions, Contingent Liabilities and Contingent Assets and those where the timing and
amount of the levy is certain.
Annual Improvements 2010-2012 Cycle
after 1 July 2014
3.1 Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by
the International Accounting Standards Board (IASB).
3.2 Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at
fair value or amortized cost, as appropriate and investment properties that are measured at fair value as explained in the accounting policies
below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
The principal accounting policies are set out below.
IAS 39
IFRIC 21
Various
The consolidated financial statements of the Group incorporate the financial statements of the Parent Company and entities (including
special purpose entities) controlled by the Parent Company (its subsidiaries). Control is achieved when the Company has power over the
investee, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to use its power to affect its
returns
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of
the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are
sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts
and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:
The size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
Potential voting rights held by the Company, other vote holders or other parties;
Rights arising from other contractual arrangements; and
Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant
activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.
IFRS 3 — Requires contingent consideration that is classified as an asset or a liability to
be measured at fair value at each reporting date
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of
the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated
statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company
ceases to control the subsidiary.
IFRS 13 — Clarifies that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove
the ability to measure certain short-term receivables and payables on an undiscounted
basis (amends basis for conclusions only)
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling
interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if
this results in the non-controlling interests having a deficit balance.
Makes amendments to the following applicable standards:
When necessary, adjustments are made to the financial statements of a group entity to bring its accounting policies into line with the Group’s
accounting policies.
IAS 16 and IAS 38 — Clarify that the gross amount of property, plant and equipment is
adjusted in a manner consistent with a revaluation of the carrying amount
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are
eliminated in full on consolidation.
IAS 24 — Clarifies how payments to entities providing management services are to be
disclosed
Various
3.3 Basis of consolidation
Annual Improvements 2011-2013 Cycle
Makes amendments to the following applicable standards:
Changes in the Group's ownership interests in existing subsidiaries
after 1 July 2014
IFRS 3 — Clarifies that IFRS 3 excludes from its scope the accounting for the formation
of a joint arrangement in the financial statements of the joint arrangement itself
IFRS 13 — Clarifies the scope of the portfolio exception in paragraph 52
IAS 40 — Clarifies the interrelationship of IFRS 3 and IAS 40 when classifying property
as investment property or owner-occupied property
The Group is currently assessing whether these changes will impact the consolidated financial statements in the period of initial application.
Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted
for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes
in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the
fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Parent Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the ag gregate of the fair
value of the consideration received or receivable and the fair value of any retained interest and (ii) the previous carrying amount of the assets
(including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at re-valued
amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in
equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Parent
Company had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified
by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair
value on initial recognition for subsequent accounting under IFRS 9 Financial Instruments: Recognition and Measurement or, when
applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.
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2013 Annual Report
3.4 Business combinations
3.5 Investments in associates
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is
measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities
incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the
acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture.
Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control
over those policies.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date,
except that:
deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in
accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of
the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Sharebased Payment at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree,
and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the
identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree
and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a
bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the
event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised
amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basi s. Other types
of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent
consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the
consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement
period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are
adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the
acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is
classified as an asset or a liability is re-measured at subsequent reporting dates in accordance with IFRS 9 (or where applicab le IAS 39 or IAS
37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or
loss.
When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is re-measured to fair value at
the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts
arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are
reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the
Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the
measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and
circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.
Business combinations that took place prior to 1 January 2010 were accounted for in accordance with the previous version of IFRS 3.The
policy described above is applied to all business combinations that took place on or after January 2010.
For common control transactions in which all of the combining entities or businesses ultimately are controlled by the same party or parties
both before and after the combination, and that control is not transitory, the Group recognises the difference between purchase
consideration and carrying amount of net assets of acquired entities or businesses as an adjustment to equity. This accounting treatment is
also applied to later acquisitions of some or all shares of the non-controlling interests in a subsidiary.
The results, assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of
accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations.
Under the equity method, an investment in an associate is initially recognised in the consolidated statement of financial position at cost and
adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the associate. When the Group's
share of losses of an associate exceeds the Group's interest in that associate (which includes any long-term interests that, in substance, form
part of the Group's net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are
recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of
an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment.
Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition,
after reassessment, is recognised immediately in profit or loss.
The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s
investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in
accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less
costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of
that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently
increases.
Upon disposal of an associate that results in the Group losing significant influence over that associate, any retained investme nt is measured at
fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with IFRS 9.The
difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the
determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognised in other
comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the
related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be
reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss
(as a reclassification adjustment) when it loses significant influence over that associate.
When a Group entity transacts with associates of the Group, profits and losses resulting from the transactions with the associate are
recognised in the Group’s consolidated financial statements only to the extent of interests in the associate that are not related to the Group.
3.6 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see note 3.4) less
accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill acquired in a business combination is allocated, starting from the acquisition date, to each of
the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
When assessing each unit or group of units to which the goodwill is so allocated, the Group’s objective is to test goodwill for impairment at a
level that reflects the way the Group manages its operations and with which the goodwill would naturally be associated under the reporting
system in place.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication
that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata based on the
carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the co nsolidated statement
of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on
disposal.
The Group’s policy for goodwill arising on the acquisition of an associate is described in note 3.5.
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2013 Annual Report
3.7 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns,
rebates and other similar allowances.
Different policies for revenue recognition apply across the Group's business segments. The following table shows the link between the
accounting policies for revenue recognition and segment information.
Accounting policies
Segments classified by type of activity
3.7.1 Revenue on sale of land
Sale of land
3.7.2 Revenue from agreements for construction of real estate
Real estate and construction
3.7.3 Construction revenue
Hotels
3.7.4 Revenue from the rendering of services
Destination management
Other operations
3.7.5 Dividend and interest income
Other operations
3.7.6 Rental income
Other operations
When contract costs incurred to date plus recognized profits less recognized losses exceed progress billings, the surplus is shown as amounts
due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognized profits
less recognized losses, the surplus is shown as amounts due to customers for contract work. Amounts received before the related work is
performed are included in the consolidated statement of financial position, as a liability, as advances received. Amounts billed for work
performed but not yet paid by the customer are included in the consolidated statement of financial position under trade andother receivables.
Construction contract revenue comprises revenue arising from finishing of sold units, extra works requested by customers and any
construction agreement with third parties.
3.7.4 Revenue from the rendering of services
Revenue from services is recognised in the accounting periods in which the services are rendered.
3.7.5 Dividend and interest income
Dividend income from investments other than in associates is recognised when the shareholder’s right to receive payment has been
established, provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of
income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to that asset’s net carrying amount on original recognition.
3.7.6 Rental income
3.7.1 Revenue on sale of land
The Group’s policy for recognition of revenue from operating leases is described in 3.8.1.
Revenue from sale of land, sale of land right and associated cost are recognised when land is delivered and the significant risks, rewards of
ownership and control have been transferred to the buyer, the amount of revenue can be measured reliably, it is probable that the economic
benefits associated with the transaction will flow to the Group and the costs incurred or to be incurred in respect of the transaction can be
measured reliably. Management uses its judgment and considers the opinion obtained from the legal advisors in assessing whether the
Group’s contractual and legal rights and obligations in the agreements are satisfied and the above criteria are met.
3.7.7 Cost of sales
3.7.2 Revenue from agreements for construction of real estate
Management uses its judgment to analyze the Group's agreements for the construction of real estate and any related agreements to
conclude whether or not the contractual terms of such agreements indicate that they are, in substance, for the provision of construction
services or for the delivery of goods that are not complete at the time of entering into the agreement. Such conclusion depends on the terms
of the agreement and all the surrounding facts and circumstances and on whether such an agreement meets the definition of a construction
contract, as described in 3.7.3 below.
In accordance with IFRIC 15, an agreement for the construction of real estate will meet the definition of a construction contract when the
buyer is able to specify the major structural elements of the design of the real estate before construction begins and / or specify major
structural changes once construction is in progress, whether it exercises that ability or not. Where such conditions are met, revenue and costs
associated with such contracts are accounted for in accordance with IAS 11 Construction Contracts (see 3.7.3).
Where an agreement for the construction of real estate does not meet the definition of a construction contract and is not for the rendering of
services, then it is accounted for as a sale of goods under the scope of IAS 18 Revenue. Management concluded that all contracts entered into
for the construction of real estate meet the revenue recognition criteria for the sale of goods.
Accordingly, revenue from the sale of real estate is recognised when all the following conditions are satisfied: the Group has transferred to
the buyer the significant risks and rewards of ownership of the real estate, the Group retains neither continuing managerial involvement to the
degree usually associated with ownership nor effective control over the real estate sold, the amount of revenue and the costs incurred or to be
incurred in respect of the transaction can be measured reliably and it is probable that the economic benefits associated with the transaction
will flow to the entity.
3.7.3 Construction revenue
A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely
interrelated or interdependent in term of their design, technology and function or their ultimate purpose or use.
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of
completion of the contract activity at the end of the reporting period measured based on the completion of a physical proportion of the
contract work. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the
customer, their amount can be measured reliably and its receipt is considered probable.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs
incurred that is probable to be recovered. Contract costs are recognised as expenses in the period in which they are incurred. When it is
probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
Cost of sales comprises costs related directly to the sale of goods or rendering of services. These costs include also administration expenses of
revenue generating entities in the Group. Under administration expenses are costs allocated for corporate and head quarter functions as
well as non revenue generating entities, such as corporate companies, holding companies and start up companies. Companies providing
these services are marked as HQ in the subsidiaries' list in note 19.
3.8 Leasing
Leases are classified as finance leases whenever the terms of the lease substantially transfer all the risks and rewards of ownership to the
lessee. All other leases are classified as operating leases.
3.8.1 The Group as lessor
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group's net investment in the leases.
Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment
outstanding in respect of the leases.
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis
over the lease term.
3.8.2 The Group as lessee
Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the
present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a
finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest
on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are dire ctly attributable to
qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs (see 3.10 below).
Contingent rentals are recognised as expenses in the periods in which they are incurred.
If a sale and leaseback transaction results in a finance lease, the asset is recognized at its previous carrying amount and any gain/loss
recognized over the lease term. In case of a loss, management assesses whether the asset is impaired.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except when another systematic basis is
more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under
operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate
benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except when another systematic basis is more
representative of the time pattern in which economic benefits from the leased asset are consumed.
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2013 Annual Report
The following principles apply when borrowing costs are partly or fully capitalized by the Group as part of a qualifying asset:
3.9 Foreign currencies
The individual financial statements of each subsidiary are presented in the currency of the primary economic environment in which the entity
operates (its functional currency). For the preparation of the Group’s consolidated financial statements, the results and financial position of
each subsidiary are translated into Swiss Franc (CHF), which is the Group’s presentation currency.
Where hedge accounting is not applied to minimize the interest rate risk on borrowings used to fund that asset and, therefore derivatives
are classified as at fair value through profit or loss, all gains / losses on non-hedging derivatives are immediately recognized in profit or
loss.
In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency
(foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period,
monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair
value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Where variable rate borrowings are used to finance a qualifying asset and a derivative is designated to cash flow hedge the variability in
interest rates on such borrowings, any gain or loss on the hedging derivative that is effective and, therefore previously recognized in other
comprehensive income, is reclassified from equity to profit or loss when the hedged risk impacts profit or loss. The hedged interest
component of the qualifying asset (hedged risk) impacts profit or loss when the qualifying asset is amortized, impaired or sold.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:
Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included
in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
Exchange differences on monetary items that qualify as hedging instruments in transactions entered into to hedge certain foreign
currency risks (see 3.22 below for hedging accounting policies); and
Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor
likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other
comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into
Swiss Francs (CHF) using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the
average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at
the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated
in the Group’s foreign currency reserve, a separate component in equity (attributed to non-controlling interests as appropriate).
On the disposal of a foreign operation (i.e. disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control
over a subsidiary that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign
operation), all of the exchange differences accumulated in other comprehensive income in respect of that operation attributable to the
owners of the Parent are reclassified to profit or loss.
In the case of a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of
accumulated exchange differences are re-attributed to non-controlling interests and are not recognized in profit or loss. For all other partial
disposals (i.e. reductions in the Group's ownership interest in associates that do not result in the Group losing significant influence), the
proportionate share of the accumulated exchange differences is reclassified to profit or loss.
Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated
as assets and liabilities of the foreign operation and translated at the exchange rate prevailing at the end of each reporting period. Exchange
differences arising are recognised in equity.
The exchange rates for the major foreign currencies against CHF relevant to the annual consolidated financial statements were:
Currency table
2013
Average
Year end
2012
Average
Where fixed rate borrowings are used to finance a qualifying asset and a derivative is designated to hedge the fair value exposure to
changes in interest rates of such borrowings, the synthetic floating interest rate that is achieved as a result of a highly effective hedge is
capitalized, so that borrowing costs always reflect the hedged interest rate. The amount of borrowing costs capitalized in such a case
comprises the actual fixed rate on the borrowings plus the effect of swapping this fixed rate into floating rates.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
As the financing activity is co-ordinated centrally and generally by the parent and some of the main subsidiaries, the group determines the
amount of borrowing costs eligible for capitalisation by applying a capitalisation rate to the expenditures on that asset. The group includes all
borrowings of the parent and its subsidiaries when computing the weighted average of the borrowing costs applicable to the borrowings that
are outstanding during the period other than borrowings made specifically for the purpose of obtaining a qualifying asset.
The amount of borrowing costs that an entity capitalises during the period shall not exceed the amount of borrowing costs it incurred during
that period, provided that the carrying amount of the qualifying asset on which eligible borrowing costs have been capitalized does not exceed
its recoverable amount (being the higher of fair value less costs to sell or amount in use for that asset).
3.11 Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attached to them
and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the
related costs for which the grants are received.
Government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are
recognised as deferred revenue in the consolidated statement of financial position and transferred to profit or loss on a systematic and
rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate
financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.
The benefit of a government loan granted at below-market interest rates of interest is treated as a government grant and measured as the
difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
Year end
1 EGP Egyptian Pound
0.1349
0.1282
0.1544
0.1435
1 USD US Dollar
0.9268
0.8908
0.9377
0.9129
1 EUR Euro
1.2307
1.2268
1.2052
1.2073
1 OMR Oman Rial
2.4074
2.3137
2.4356
2.3711
1 AED United Arab Emirates Dirham
0.2523
0.2425
0.2553
0.2485
1 MAD Moroccan Dirham
0.1102
0.1090
0.1085
0.1081
1 JOD Jordanian Dinar
1.3067
1.2567
1.3235
1.2862
3.10 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessary take a
substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time, as the assets are
substantially ready for their intended use or sale.
3.12 Retirement benefit costs
Employee pension and retirement benefits are based on the regulations and prevailing circumstances of those countries in whichthe Group is
represented. In Switzerland, ordinary pension and retirement benefit plans qualify as defined-benefit plans and are accounted for in
conformity with IAS 19 Employee Benefits.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with
actuarial valuations being carried out at the end of each reporting period. Actuarial gains and losses are recognized immediately through
other comprehensive income, whereas past service-costs (vested and unvested) are recognized immediately in profit or loss.
The retirement benefit obligation recognised in the consolidated statement of financial position represents the present value of the defined
benefit obligation reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the present value of available
refunds and reductions in future contributions to the plan.
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling
them to the contribution.
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2013 Annual Report
3.13 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
3.13.1 Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of
comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable
or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of
the reporting period.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is
no reasonable certainty that ownership of the leased asset will be obtained by the end of the lease term, assets are depreciated over the
shorter of the lease term and their useful lives.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as
the difference between the net sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
The following estimated useful lives are used in the calculation of depreciation:
3.13.2 Deferred tax
Buildings
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial
statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the Balance Sheet Liability
Method.
Plant and equipment
4 – 25 years
Furniture and fixtures
3 – 20 years
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all
deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible
temporary differences can be utilized.
Such deferred tax liabilities are not recognised if the temporary difference arises from goodwill and no deferred tax assets or liabilities are
recognised for temporary differences resulting from the initial recognition (other than in a business combination) of other assets and liabilities
in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and
interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the
extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they
are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the
asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The
measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group
expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities
on a net basis.
3.13.3 Current and deferred tax for the year
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised in
other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive
income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the
tax effect is included in the accounting for the business combination.
3.14 Property, plant and equipment
Buildings, plant and equipment, furniture and fixtures held for use in the production, supply of goods or services or for administrative purposes
are stated in the consolidated statement of financial position at cost less any accumulated depreciation and accumulated impairment losses.
Properties in the course of construction for production, administrative purposes or for a currently undetermined future use are carried at cost
less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalized in accordance with
the Group’s accounting policy as described in note 3.10. Such properties are classified to the appropriate categories of property, plant and
equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences
when the assets are ready for their intended use.
Depreciation of buildings, plant and equipment as well as furniture and fixtures commences when the assets are ready for their intended use.
Freehold land is not depreciated.
Depreciation is recognized so as to write off the cost of assets (other than freehold land and properties under construction) less their residual
values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are
reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
20 – 50 years
3.15 Investment property
Investment properties are properties (land or a building – or part of a building – or both) held by the Group entities to earn rentals and / or for
capital appreciation (including property under construction for such purposes). Investment properties are measured initially at cost, including
transaction costs. Subsequent to initial recognition, investment properties are measured at fair value at the end of each reporting period.
Gains and losses arising from changes in the fair value of investment properties are recognised in profit or loss including an adjustment to the
related deferred tax position in the period in which they arise.
Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.
The fair value of investment properties reflects market conditions at the end of each reporting period and is determined without any
deduction for transaction costs which the Group may incur on sale or other disposal. The fair value of investment properties is determined
based on evaluations performed by independent valuators.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future
economic benefits are expected from the disposal. Any gain or loss arising on de-recognition of the property (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is
derecognised.
3.16 Impairment of tangible assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the 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 cashgenerating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also
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.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the
asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
recognized immediately in profit or loss.
3.17 Inventories
Inventories are stated at the lower of cost and net realizable value.
Costs, including an appropriate portion of fixed and variable production overheads as well as other costs incurred in bringing the inventories
to their present location and condition, are assigned to inventories by the method most appropriate to the particular class of inventory, with
the majority being valued on a weighted average basis. For items acquired on credit and where payment terms of the transaction are
extended beyond normal credit terms, the cost of that item is its cash price equivalent at the recognition date with any difference from that
price being treated as an interest expense on an effective-yield basis (see note 11).
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Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make
the sale.
Estimates of net realisable value are generally made on an item-by-item basis, except in circumstances, where it is more approp riate to group
items of similar or related inventories.
The net realizable value of an item of inventory may fall below its cost for many reasons including, damage, obsolescence, slow moving items, a
decline in selling prices, or an increase in the estimate of costs to complete and costs necessary to make the sale. In such cases, the cost of that
item is written-down to its net realizable value and the difference is recognized immediately in profit or loss.
Properties intended for sale in the ordinary course of business or in the process of construction or development for such a sale are included in
inventories. These are stated at the lower of cost and net realizable value. The cost of development properties includes the cost of land and
other related expenditure attributable to the construction or development during the period in which activities are in progress that are
necessary to get the properties ready for its intended sale.
3.18 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the
Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the
reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash
flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value
of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is
recognised as an asset, if it is virtually certain that reimbursement will be received and the amount of the receivable can bemeasured reliably.
3.19 Financial instruments
Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisionsof the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added
to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or
loss.
3.20 Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales
are purchases or sales of financial assets that require delivery of assets within the timeframe established by regulation or convention in the
market place.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the
classification of the financial assets.
3.20.1 Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured at amortised cost less impairment loss (except for debt
investments that are designated as at fair value through profit or loss on initial recognition):
the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
3.20.3 Financial assets at fair value through other comprehensive income (FVTOCI)
On initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity
instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading.
A financial asset is held for trading if:
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has evidence of a
recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.
Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at
fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the
investments revaluation reserve. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the investments.
The Group has designated all investments in equity instruments that are not held for trading as at FVTOCI on initial application of IFRS 9.
Dividends on these investments in equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is
established in accordance with IAS 18 Revenue. Dividends earned are recognised in profit or loss and are included in the ‘inve stment income’
line item.
3.20.4 Financial assets at fair value through profit or loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Group designates an investment that is not held for trading as at fair
value through other comprehensive income (FVTOCI) on initial recognition.
Debt instruments that do not meet the amortised cost are measured at FVTPL. In addition, debt instruments that meet the amortised cost
criteria but are designated as at FVTPL are measured at FVTPL. A debt instrument may be designated as at FVTPL upon initial recognition if
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or
liabilities or recognising the gains and losses on them on different bases. The Group has not designated any debt instrument as at FVTPL.
Debt instruments are reclassified from amortised cost to FVTPL when the business model is changed such that the amortised cost criteria are
no longer met. Reclassification of debt instruments that are designated as at FVTPL on initial recognition is not allowed.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement
recognised in profit or loss. The net gain or loss recognised in profit or loss is included in the 'other gains and losses' line item in the
consolidated statement of comprehensive income. Fair value is determined in the manner described in note 42.12.
Interest income on debt instruments as at FVTPL is included in the net gain or loss described above.
Dividend income on investments in equity instruments at FVTPL is recognised in profit or loss when the Group's right to receive the dividends
is established in accordance with IAS 18 Revenue and is included in the net gain or loss as described above.
3.20.5 Impairment of financial assets
Financial assets that are measured at amortised cost are assessed for impairment at the end of each reporting period.
Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the
initial recognition of the financial assets, the estimated future cash flows of the asset have been affected.
Objective evidence of impairment could include:
significant financial difficulty of the issuer or counterparty; or
breach of contract, such as a default or delinquency in interest or principal payments; or
All other financial assets are subsequently measured at fair value.
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
3.20.2 Effective interest method
the disappearance of an active market for that financial asset because of financial difficulties.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the
relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees or points paid or
received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life
of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition,
assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past
experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days,
as well as observable changes in national or local economic conditions that correlate with default on receivables.
Income is recognised on an effective interest basis for debt instruments measured subsequently at amortised cost. Interest income is
recognised in profit or loss and is included in the “investment income” line item.
The amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future
cash flows reflecting the amount of collateral and guarantee, discounted at the financial asset's original effective interest rate.
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The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade
receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered
uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are cr edited against the
allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the
carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the
impairment not been recognised.
3.20.6 De-recognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset,
the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains
substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and
also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the
consideration received and receivable is recognised in profit or loss.
On derecognition of a financial asset that is classified as FVTOCI, the cumulative gain or loss previously accumulated in the investments
revaluation reserve is not reclassified to profit or loss, but is reclassified to retained earnings.
3.21 Financial liabilities and equity instruments
3.21.1 Classification as debt or equity
Debt and equity instruments issued by a Group entity are classified as either financial liabilities or as equity in accordance with the substance
of the contractual arrangements and the definitions of a financial liability and an equity instrument.
3.21.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of itsliabilities.
The instrument is an equity instrument if, and only if, both conditions (a) and (b) below are met:
a)
b)
The instrument includes no contractual obligation:
i.
to deliver cash or another financial asset to another entity; or
ii.
to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the
issuer.
If the instrument will or may be settled in the issuer’s own equity instruments, it is:
i.
a non-derivative that includes no contractual obligation for the issuer to deliver a variable number of its own equity instruments; or
ii.
a derivative that will be settled only by the issuer exchanging a fixed amount of cash or another financial asset for a fixed number of
its own equity instruments.
A contract that will be settled by the Group entity receiving or delivering a fixed number of its own equity instruments in exchange for a fixed
amount of cash or another financial asset is an equity instrument.
Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or
loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
3.21.3 Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
A financial liability is classified as current liability when it satisfies any of the following criteria:
It is expected to be settled in the entity’s normal operating cycle
It is held primarily for the purposes of trading;
It is due to be settled within twelve months after the reporting period;
The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.
All other financial liabilities are classified as non-current
However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing
involvement approach applies, financial guarantee contracts issued by the Group, and commitments issued by the Group to provide a loan at
below-market interest rate are measured in accordance with the specific accounting policies set out below.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designatedas at FVTPL.
A financial liability is classified as held for trading if:
it has been acquired principally for the purpose of reselling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual
pattern of short-term profit-taking; or
it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognitionif:
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is
evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information
about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and the entire combined contract is designated as at FVTPL in
accordance with IFRS 9.
Financial liabilities at FVTPL are stated at fair value. Any gains or losses arising on remeasurement of held-for-trading financial liabilities are
recognised in profit or loss. Such gains or losses that are recognised in profit or loss incorporate any interest paid on the financial liabilities and
are included in the ‘other gains and losses’ line item in the consolidated statement of comprehensive income.
However, for non-held-for-trading financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial
liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of
the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or
loss. The remaining amount of change in the fair value of liability is recognised in profit or loss. Changes in fair value attributable to a financial
liability’s credit risk that are recognised in other comprehensive income are not subsequently reclassified to profit or loss.
Financial liabilities subsequently measured at amortised cost
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent
accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on
the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the 'finance costs' line item.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The
difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash
assets transferred or liabilities assumed, is recognised in profit or loss.
3.22 Derivative financial instruments
The Group enters into a variety of derivative financial instruments mainly to manage its exposure to interest rate and foreign exchange rate
risk, including foreign exchange forward contracts and interest rate swaps. Further details of derivative financial instruments are disclosed in
notes 35 and 42.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently re-measured to
their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is
designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the
hedge relationship.
A derivative with a positive fair value is recognized as a financial asset; a derivative with a negative fair value is recognized as a financial
liability.
A derivative that has a remaining maturity of less than twelve months from the end of the reporting period or has a remaining maturity greater
than twelve months but is expected to be settled within twelve months is presented as current asset or liability.
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A derivative that is designated and effective in a hedging relationship with a non-current hedged item is presented as a non-current asset or
liability in accordance with the presentation of the hedged item.
4.1 Critical judgments in applying accounting policies
A derivative that has a maturity of more than twelve months from the end of the reporting period and is not intended to be settled within twelve
months is presented as a non-current asset or liability, even if that derivative is not part of a designated and effective hedge accounting.
The following are the critical judgments, apart from those involving estimations (see note 4.2 below), that management have made in the
process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated
3.22.1 Hedge accounting
4.1.1 Revenue recognition – Real estate sales
The Group generally designates certain derivatives as hedging instruments in respect of foreign currency risk or interest rate risk. Hedges of
foreign currency risk on firm commitments, hedges of net investments in foreign operations as well as hedges of the variability risk of interest
rates are all accounted for by the Group as cash flow hedges.
The operating cycle of residential construction projects predominantly starts when the Group enters into agreements to sell the real estate
units off-plan. The Group treats the sale of real estate units as sale of goods in accordance with IAS 18 Revenue and IFRIC 15 Agreements for
the Construction of Real Estates. Management takes the view that the critical event of revenue recognition hinges on the transfer of
significant risks and rewards of ownership and control to the buyer. When management makes this assessment it ensures that the detailed
criteria for revenue recognition from the sale of goods as set out in IAS 18 and IFRIC 15 - including the transfer of significant risks and rewards
of ownership and control to the buyer - are satisfied and that recognition of revenue from the sale of real estate is appropriate in the current
reporting period.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along
with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge
and on an ongoing basis, the Group documents whether the hedging instrument, in a hedging relationship, is highly effective in offsetting
changes in cash flows of the hedged item attributable to the hedged risk.
3.22.2 Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is
recognised immediately in profit or loss, and is included in the ‘other gains and losses’ line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods
when the hedged item is recognised in profit or loss, in the same line of the consolidated statement of comprehensive income as the
recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously recognized in other comprehensive income and accumulated in equity are transferred from equity
and included in the initial measurement of the cost of the non-financial asset or non-financial liability.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or
exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated
in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a
forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss.
3.23 Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current
asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be
expected to qualify for recognition as a completed sale within one year from the date of classification.
When a Group entity acquires a non-current asset (or disposal group) exclusively with a view to its subsequent disposal, it classifies the noncurrent asset (or disposal group) as held for sale at the acquisition date only if the one-year requirement above is met and it is highly probable
that the other criteria above that are not met at that date will be met within a short period following the acquisition.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are
classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in
its former subsidiary after the sale.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amoun t and fair value
less costs to sell.
4 CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in note 3, management is required to make judgments, estimates
and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects
both current and future periods.
Given the structure of the real estate sale contracts and the application of IAS 18 and IFRIC 15 as described above, revenue recognition from
residential construction projects can occur in independent stages which consist of the sale of land, constructed, but unfinished units and
finished units. The transfer of significant risks and rewards of ownership and control of each stage is documented in an official delivery
protocol and signed by representatives of the Group as well as the buyer.
4.1.2 Government grants
Acquisition by the Group entities of part of the land used in the construction of their real estate projects from governments of the local
jurisdictions in which they carry out their activities has not brought these transactions under the scope of IAS 20 Accountin g for Government
Grants and Disclosure of Government Assistance and, therefore, has not resulted in the recognition of government grants in the current or in
prior periods.
In these cases the government is the only possible seller in the market and the Group purchases the land at market prices available to all
interested parties and does not obtain finance facilities from the government which would require accounting for government grants.
4.1.3 Employee benefits expense
Employee benefits expense which are directly related to the sale of goods or rendering of services form part of the operation’s cost of sales.
Where employee benefit expense is incurred to perform head quarter functions or relate to non-revenue generating entities, such as
corporate companies, holding companies and start up companies, they are allocated to administration expenses.
4.1.4 Sale of 15% stake in Garranah investments and sale of tour operations
On 1 November 2012, the Group signed a share sale and purchase agreement to sell to the Garranah family an additional 15% perce nt stake
in five investments whereof four are operating floating hotels (International Stock Company for Floating Hotels & Touristic Establishments,
Mirotel for Floating Hotels Company, Tarot Garranah & Merotil for Floating Hotels, El Tarek for Nile Cruises & Floating Hotels) and one is
active as a tour operator (Tarot Tours Company (Garranah) SAE). The company that provides tour transportation services (Tarot Garranah
for Touristic Transportation) has been sold completely.
Pursuant to this agreement, the Group’s interest in the four operating floating hotels and the tour operator decreased from 45 to 30 percent
however the Group keeps significant influence over these investments in associates. All interests held in the company providing tour
transportations services have been sold. Legal procedures to transfer title were still in process at year end.
Losses on disposal of the 15% stake in Garranah Group entities of CHF 6.4 million were realized on sale of the 15% stake. However, as such
losses were already recognized as indirect impairment through provisions based on the estimated sales price in the third quarter of 2012,
they are shown as impairment and not as loss from disposal of part of the investments in associates. Together with the gains from the sale of the
tour transportation services company these losses were recognised through “other gains and losses” (refer to note 10 for further details).
Included in these sale and purchase agreements is also the sale of the residual entity of the Group operation in the tour operations segment.
This sale is disclosed as a discontinued operation in accordance with IFRS 5 in these consolidated financial statements, as management is of
the opinion that being the residual entity of the tour operations segment the sale represents a separate major line of business. This part of the
transaction also included an additional purchase of 8.8% in the subsidiary Royal for Investments.
4.1.5 Deferred taxation on investment property
For the purposes of measuring deferred tax liabilities or deferred tax assets arising from investment properties management concluded that
the Group’s investment properties are held under a business model whose objective is to consume substantially all of the economic benefits
embodied in the investment properties over time, rather than through sales. Therefore, in determining the Group’s deferred taxation on
investment properties, management has determined that the presumption that the carrying amounts of investment properties measured
using the fair value model are recovered entirely through sale is rebutted. As a result, the Group has recognised deferred taxe s on changes in
fair value of investment properties.
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4.2 Key sources of estimation uncertainty
The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting
period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year.
4.2.1 Impairment of tangible assets and investments in associates
At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets and investments in associat es to determine
whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the 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 cashgenerating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also
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.
In light of the political development in Egypt, management reconsidered the recoverability of the Group's significant items of property, plant
and equipment and its investments in associates, which are included in the consolidated statement of financial position at 31 December 2013
at CHF 766,992,221 and CHF 103,633,179 respectively (31 December 2012: CHF 1,002,981,620 and CHF 18,852,835).
As at 31 December 2o13 the impairment review of investments in associates resulted in an impairment loss of CHF 4.6 million on the
investments in Garranah entities. All investments in Garranah entities are now completely written off. Already in 2012 some of the
investments in Garranah entities were impaired by CHF 18.6 million. The impairment losses are shown as other gains and losses (for further
details see notes 10 and 20).
In relation to property, plant and equipment, the impairment review of the Eco Bos project in the UK resulted in an impairment loss of CHF
10.9 million which is mainly due to capitalized cost for which no future benefit can be expected. Further, the impairment review of the budget
housing project in Haram City resulted in an impairment loss of CHF 4.3 million which is recognized within property, plant and equipment.
The impairment losses are shown as other gains/losses (note 10.)
Other than that no other items of property, plant and equipment or investments in associates were impaired. Management is aware that the
slow-down in processes and logistics still impacts the business operations considerably. Therefore, they periodically reconsider their
assumptions in light of the macroeconomic developments regarding future anticipated margins on their products. Detailed sensitivity analysis
has been carried out and management is confident that the carrying amount of these assets will be recovered in full, even if returns are
reduced. This situation will be closely monitored, and adjustments made in future periods if future market activity indicates that such
adjustments are appropriate.
4.2.2 Valuation of financial assets at FVTOCI
Basically the fair value of financial assets at FVTOCI is based on stock quotes. However, due to extraordinary situations, as for example the
political situation in Egypt, such market prices might not reflect the real value at all times. In such cases alternative valuation methods are used
to determine the fair value.
4.2.3 Useful lives of property, plant and equipment
The carrying value of the Group's property, plant and equipment at the end of the current reporting period is CHF 766,992,221 (31
December 2012: CHF 1,002,981,620). Management’s assessment of the useful life of property, plant and equipment is based on the
expected use of the assets, the expected physical wear and tear on the assets, technological developments as well as past experience with
comparable assets. A change in the useful life of any asset may have an effect on the amount of depreciation that is to be recognized in profit
or loss for future periods.
4.2.4 Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been
allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit
and a suitable discount rate in order to calculate present value.
The carrying amount of goodwill at the end of the current reporting period is CHF 6,553,348 (31 December 2012: 7,331,756). The
recoverability of goodwill is tested for impairment annually during the fourth quarter, or earlier, if an indication of impairment exists. The value
of goodwill is primarily dependent upon projected cash flows, discount rates (WACC) and long-term growth rates. The significant
assumptions are disclosed in note 18. As at 31 December 2013 the annual impairment test showed no impairment loss (2012: none). Changes
to the assumptions may result in further impairment losses in subsequent periods.
4.2.5 Provisions
The carrying amount of provisions at the end of the current reporting period is CHF 95,605,112 (31 December 2012: CHF79,106,988). This
amount is based on estimates of future costs for infrastructure completion, legal cases, government fees, employee benefits and other
charges including taxes in connection with the Group’s operations (see note 36). As the provisions cannot be determined exactly, the amount
could change based on future developments. Changes in the amount of provisions due to change in management estimates are accounted for
on a prospective basis and recognized in the period in which the change in estimates arises.
4.2.6 Impairment of trade and other receivables as well as other current assets
An allowance for doubtful receivables is recognized in order to record foreseeable losses arising from events such as a customer’s insolvency.
The carrying amount of the allowance for trade and other receivables at the end of the current reporting period is CHF 25,971,712 (31
December 2012: CHF 42,730,631) (see note 24). In determining the amount of the allowance, several factors are considered. These include
the aging of accounts receivables balances, the current solvency of the customer and the historical write-off experience.
A similar assessment has been done in relation to the recoverability of other current assets amounted to CHF 61,706,893 (2012:
CHF 74,015,193) which includes amounts due from employees and management (see note 26) as well as outstanding proceeds from the sale
of the six percent stake in the former Garranah subsidiaries. To determine the need for the recognition of any impairment charge,
management considered several factors, such as the contractual repayment date, current solvency of the counterparty and historical writeoff experience. In 2012 an impairment charge of total CHF 9.9 million has been booked in relation to the amounts outstanding from
employees and management. In 2013 there were no further impairment losses within other current assets.
4.2.7 Deferred income taxes
The measurement of deferred income tax assets and liabilities is based on the judgment of management. Deferred income tax assets are only
capitalized if it is probable that they can be used. Whether or not they can be used depends on whether the deductable tax temporary
difference can be offset against future taxable gains. In order to assess the probability of their future use, estimates must be made of various
factors including future taxable profits. At 31 December 2013 deferred income tax assets amounted to CHF 15,679,458 (31 December
2012: CHF 31,097,243) that have mainly resulted from the tax impact of carry forward tax losses (see note 13). Such deferred tax assets are
only recorded when the development phase of the project has been started and it becomes evident that future taxable profits are probable. If
the actual values differ from the estimates, this can lead to a change in the assessment of recoverability of the deferred tax assets and
accounting for such a change, if any, is to be made on a prospective basis in the reporting periods affected by the change. As at 31 December
2013, the reassessment of the recoverability of deferred tax assets resulted in derecognised deferred tax assets of CHF 11.4 million.
4.2.8 Retirement benefit obligations
The retirement benefit obligation is calculated on the basis of various financial and actuarial assumptions. The key assumptions for assessing
these obligations are the discount rate, future salary and pension increases and the probability of the employee reaching retirement. The
obligation was calculated using a discount rate of 2.10% (31 December 2012: 2.00%) as well as future salary increases of 1.00% (31
December 2012: 1.00%).. The calculations were done by an external expert and the principal assumptions used are summarised in note 40.
At 31 December 2013, the underfunding amounted to CHF 977,640 (31 December 2012: CHF 2,604,653). Using other basis for the
calculations could have led to different results.
4.2.9 Classification and valuation of investment property
Generally real estate units are constructed either for the Group’s own use or for the sale to third parties and carried at cost. However, when a
unit may not be sold, as soon as a long term rent contract over more than 1 year is agreed with a third party at market conditions, the unit is
classified as an investment property and measured at the fair value obtained from independent, third party valuation experts. The fair value of
investment properties at 31 December 2013 is CHF 9,986,618 (2012: CHF 78,903,321).
The fair values at 31 December 2013, which exclude the investment properties of CMAR (see note 28 for details), were determined based
on an internal valuation model. The last external valuations were prepared as at 31 December 2012 by Fincorp, an accredited valuation
specialist in Egypt. Note 17 provides detailed information about the valuation techniques applied and the key assumptions used in the
determination of the fair value of each investment property.
4.2.10 Net realisable value of inventory
Inventory mainly includes real estate construction work under progress which is recognised at cost or net realisable value. The majority of real
estate under construction (approximately three quarters) is already sold at market prices which are significantly higher than construction
cost. Therefore the estimation uncertainty only relates to the unsold real estate under construction. In general the profit margins on these real
estate projects are high and management currently does not expect any of these projects to be sold below cost except for the following:
Impairment review of real estate projects in Oman showed that for some real estate units the expected market price is below its
construction costs. Therefore a write-down of CHF 4.9 million has been recognized within cost of sales.
4.2.11 Infrastructure cost
The Group has an obligation under the terms of its sale and purchase agreements to develop the infrastructure of the sold land. Infrastructure
cost is deemed to form part of the cost of revenue and is based on management estimate of the future budgeted costs to be incurred in
relation to the project including, but are not limited to, future subcontractor costs, estimated labor costs, and planned other material costs.
The provision for infrastructure costs requires the Group’s management to revise its estimate of such costs on a regular basis in light of
current market prices for inclusion as part of the cost of revenue.
F-30
F-32
2013 Annual Report
4.2.12 Liquidity shortages and related uncertainties
The following is an analysis of the Group's revenue from continuing operations by its major products and services.
For further details on management’s plans to manage liquidity shortages and related uncertainty please refer to note 27.1.
4.2.13 Minimum building obligations
One part of the Group’s business is to acquire land for the development of tourism projects. Out of these business opportunities often no
legally binding commitments incur however the Group has unbinding business opportunity commitments in relation to their projects. These
contingent liabilities are further explained in note 47.1. Due to the complexity of the projects and the ongoing negotiations, estimation of the
contingent liability involves a high degree of uncertainty.
Product
Hotels
Hotels managed by international chains
89,925,698
107,571,922
Hotels managed by local chains
20,362,418
26,584,114
Hotels managed by the Group
15,530,237
13,429,469
125,818,353
147,585,505
34,418,058
54,561,285
Budget Housing
7,791,369
14,262,654
Construction work
7,580,193
7,447,662
49,789,620
76,271,601
905,947
-
14,606,430
16,500,275
Segment total
Real estate and
construction
5 THE GROUP AND MAJOR CHANGES IN GROUP ENTITIES
The Group comprises of the Parent Company and its subsidiaries operating in different countries.
Except for the deemed loss of control of the operating entities in Switzerland (for further details see note 39) there have been no major
changes in the group structure during the financial period.
Orascom Hotels & Development SAE (“OHD”) remains the principal operating subsidiary and is located in Egypt.
Revenue from external customers
2012
2013
Restated
Segment
Tourism real estate
Segment total
Land sales
Sales of land and land rights
Utilities (e.g. water, electricity)
Other operations
Mortgage (Real estate financing)
7,106,153
6,626,927
Sport (Golf)
2,784,016
2,698,181
Rentals (i)
8,726,233
8,542,561
6 REVENUE
Hospital services
2,962,943
3,635,022
Educational services
2,139,000
2,318,836
An analysis of the Group’s revenue for the year is as follows:
Marina
2,181,401
1,957,357
Limousine
424,112
522,438
Laundry services
58,264
83,845
3,876,910
5,053,313
The group controls its subsidiaries directly and indirectly.
CHF
2013
2012
Revenue from the rendering of services and rental income
170,683,815
195,524,260
Revenue from agreements for construction of Real Estate and construction revenue
49,789,620
76,271,601
Others
Segment total
TOTAL
Revenue on sale of land
TOTAL
905,947
-
221,379,382
271,795,861
7 SEGMENT INFORMATION
7.1 Products and services from which reportable segments derive their revenues
After selling the last subsidiary operating in the “Tours operations” segment in 2012 and therefore showing the “Tours operations” segment as
discontinued operation (note 14), the Group has four remaining reportable segments, as described below, which are the Group’s strategic
divisions. The strategic divisions offer different products and services and are managed separately because they require different skills or
have different customers. For each of the strategic divisions, the Country CEOs and the Head of Segments review the internal management
reports at least on a quarterly basis. The following summary describes the operation in each of the Group’s reportable segments:
–
Hotels – Include provision of hospitality services in two to five star hotels owned by the Group which are managed by intern ational or local
hotel chains or by the Group itself.
–
Real estate and construction – Include acquisition of land in undeveloped areas and addition of substantial value by building residential
real estate and other facilities in stages.
–
Land sales – Include sale of land and land rights to third parties on which the Group have developed or will develop certain infrastructure
facilities and where the Group does not have further development commitments.
–
Destination management – Include provision of facility and infrastructure services at operational resorts and towns.
Other operations include the provision of services from businesses not allocated to any of the segments listed above comprising rentals from
investment properties, mortgages, sports, hospital services, educational services, marina, limousine rentals, laundry services and other
services. None of these segments meets any of the quantitative thresholds for determining a reportable segment in 2013 or 2012.
(i)
30,259,032
31,438,480
221,379,382
271,795,861
Rentals include income from investment property of CHF 6,463,392 (2012: CHF 6,170,558) and from other short term rent contracts
in hotels, marinas and golf courses of CHF 2,262,841 (2012: CHF 2,372,003).
317,610,040
49,554,801
33,526,669
975,552
107,342,907
126,210,111
2013
(96,230,658)
(19,295,769)
(18,920,239)
(69,605)
(57,553,287)
(391,758)
2013
-
(54,029,768)
(18,777,694)
(19,756,215)
-
(15,495,859)
2012
Restated
Inter-segment revenue
221,379,382
30,259,032
14,606,430
905,947
49,789,620
125,818,353
2013
271,795,861
31,438,480
16,500,275
-
76,271,601
147,585,505
2012
Restated
Revenue external customers
(186,911,772)
(19,607,617)
(14,666,100)
(330,449)
(57,080,533)
(95,227,073)
2013
2013
(16,528,458)
(2,957,323)
(866,913)
(4,386,626)
(3,260,212)
(27,999,532)
(101,887,587)
(76,835,957)
(257,005)
(17,936,198)
(21,794,409)
(218,711,156)
(29,652,776)
(2,796,021)
(5,206,170)
(991,611)
(2,303,264)
(18,355,710)
2012
Restated
Depreciation
2012
Restated
Cost of revenue
6,468,078
7,391,203
(4,446,296)
(291,415)
(10,248,236)
14,062,822
2013
23,431,929
6,848,050
(6,642,093)
(1,248,616)
(2,867,620)
27,342,208
2012
Restated
Gross profit/(loss)
6,792,005
(160,446,898)
(20,702,988)
(139,743,910)
(20,615,634)
(70,755,383)
539,927
(25,455,590)
(10,464,453)
(12,992,777)
8,176,478
(5,276,667)
(3,391,895)
(19,292,698)
Further, impairment review of real estate projects in Oman showed that for some real estate units the expected market price is below its construction costs. Therefore a write-down of CHF 4.9 million has been recognized within
cost of sales (note 23). The impairment losses have been allocated to the real estate and construction segment. No such write-downs were recognized in 2012.
In 2013, impairment losses of CHF 10.9 million regarding property, plant and equipment have been recognized for Eco Bos project in the UK which has not been allocated to one of the segments due to headquarter function of the
entity . Further, in 2013 impairment review of the budget housing project in Haram City resulted in an impairment loss of CHF 4.3 million which was recognized in property, plant and equipment (note 16) and CHF 6.8 million as
additional provision (note 16). The impairment losses have been allocated to the real estate and construction segment. No impairment loss in respect of property, plant and equipment as well as goodwill was recognized in 2012.
No single customer contributed ten percent or more to the Group’s revenue for both 2013 and 2012.
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3. Segment result represents the profit earned by each segment without allocation of central administration
costs and directors’ salaries, share of profits (losses) of associates, investment income, other gains and losses, finance costs and income tax expense, as included in the internal management reports that are regularly reviewed by the
Board of Directors. This measure is considered to be most relevant for the purpose of resources allocation and assessment of segment performance.
(90,394,042)
(11,118,118)
(79,275,924)
(2,684,171)
(66,281,028)
302,197
(31,025,033)
(907,733)
21,319,844
12,969,438
(6,492,586)
(3,033,960)
(3,025,496)
20,902,448
2012
Restated
Segment result
2013
* For the purpose of segment reporting, part of the amounts reported for these items in the consolidated statement of comprehensive income have been allocated in the table above to their relevant segments.
(Loss) for the year (continuing operations)
Income tax expenses
(Loss) before tax (continuing operations)
Finance costs
325,825,629
50,216,174
36,256,490
-
91,767,460
147,585,505
2012
Restated
Total segment revenue
Central administration costs and directors’ salaries
Investment income
Share of (losses) of associates
Unallocated items*:
Total
Other operations
Land sales
Hotels
CHF
The following is an analysis of the Group’s revenue and results from continuing operations by reportable segments:
7.2 Segment revenue, depreciation and results
2013 Annual Report
CHF
Hotels
Other operations
CONSOLIDATED TOTAL ASSETS
CHF
Land sales
Other operations
Segment liabilities before elimination
Inter-segment elimination
Segment liabilities after elimination
Liabilities directly associated to non-current assets held for sale
Unallocated liabilities
CONSOLIDATED TOTAL LIABILITIES
CHF
Hotels
Land sales
TOTAL
31 December
2013
633,456,076
31 December
2013
2013
F-34
7.3 Segment assets and liabilities
7.3.1 Segment assets and liabilities
31 December
2012
Restated
SEGMENT ASSETS
738,364,607
835,133,739
974,017,458
Land sales
337,675,672
384,691,034
165,410,313
175,807,577
230,005,117
387,005,768
Segment assets before elimination
2,201,680,917
2,659,886,444
Inter-segment elimination
(980,627,865)
(989,626,735)
Segment assets after elimination
1,221,053,052
1,670,259,709
149,783,206
-
Unallocated assets
301,883,732
412,431,587
1,672,719,990
2,082,691,296
31 December
2012
Restated
SEGMENT LIABILITIES
Hotels
312,676,002
625,400,241
773,067,961
108,142,757
125,823,904
111,699,142
114,786,374
421,486,508
298,562,208
416,862,315
1,456,480,350
1,852,027,062
(964,484,289)
(1,138,287,574)
491,996,061
713,739,488
79,403,411
-
339,551,874
392,735,246
910,951,346
1,106,474,734
For the purpose of monitoring segment performance and allocation of recourses between segments, all assets and liabilities are allocated to
reportable segments except for the assets of holding companies or companies which are not yet operational. Goodwill is allocated to
reportable segments as described in note 18.
7.3.2 Additions to non-current assets
2012
66,251,142
102,988,784
2,838,101
2,665,624
-
487,069
403,040
Other operations
6,006,943
5,642,239
Unallocated
9,007,673
17,039,672
84,590,928
128,739,359
2013 Annual Report
7.4 Geographical information
9 INVESTMENT INCOME
The Group currently operates in eight principal geographical areas – Egypt, Oman, United Arab Emirates, Jordan, Switzerland, UK,
Montenegro and Morocco. The Group's revenue from continuing operations from external customers by location of operations and
information about its non-current assets by location of assets are detailed below:
Revenue
CHF
Egypt
Non-current assets
2012
2013
Restated
2012
Restated
2013
160,577,115
210,659,247
488,592,192
552,055,026
Oman
14,528,022
17,575,560
199,516,083
170,966,706
United Arab Emirates
29,183,238
29,519,371
46,673,395
49,788,656
4,757,173
4,144,485
14,749,391
16,463,538
Switzerland 1)
-
74,438
-
184,326,790
UK
-
-
-
16,111,292
Montenegro
-
-
-
17,177,364
Romania 2)
-
-
-
5,949,121
22,018
-
3,107,753
4,534,723
Jordan
Morocco
Others
TOTAL
12,311,816
9,822,760
30,893,373
71,843,481
221,379,382
271,795,861
783,532,187
1,089,216,697
CHF
Interest income:
- Bank deposits
- Other loans and receivables
1,527,315
1,595,097
3,845,655
3,919,398
Dividends received from equity investments
TOTAL
-
105,906
5,372,970
5,620,401
Investment income earned on financial assets by category of assets is CHF 5,372,970 (2012: CHF 5,514,495) for loans and receivables
including cash and bank balances and none (2012: CHF 105,906) for dividend income earned on financial assets at FVTOCI.
Gains or (losses) relating to financial assets classified as at fair value through profit or loss is included in “Other gainsand losses” in note 10.
10 OTHER GAINS AND LOSSES
CHF
Gain on disposal of property, plant and equipment
1)
2012
Restated
2013
All operations in Switzerland except for the holding company have been deconsolidated in 2013 due to deemed loss of control of ASA and
its subsidiaries (note 39). They are now classified as investments in associates (note 20).
Net foreign exchange losses
Not a principal geographical area anymore as it has been reclassified as disposal group in 2013 (note 38)
615,377
390,539
(13,466,333)
(9,826,419)
(11,120,794)
-
Impairment losses on property, plant and equipment (ii)
(10,901,693)
-
Non-current assets exclude investments in associates, financial instruments and deferred tax assets.
Impairment losses in relation to investments in associates (iii)
(4,608,936)
(18,582,682)
7.5 Additional information on segment results
Impairment losses in relation to reversed sales (iv)
-
(7,371,785)
2)
Impairment losses and provisions in relation to budget housing project (i)
2012
Restated
2013
Gain from change in fair value of investment property (v)
The aftermath of the Arab Spring continues to affect the Group’s performance in 2013 as the political uncertainty and the afte r-effects of the
extraordinary events that took place in Egypt and other countries in the Middle East have had a significant impact on the general business
environment in these countries. The slow-down in processes and logistics does still impact the business operations considerably.
Loss on reclassification of subsidiaries as disposal group (vi)
Gain on disposal of subsidiaries (vii)
Other gains/(losses)
Total segment result of CHF (13.0) million (2012: CHF 21.3 million) mainly decreased due to the following:
There was a significant decrease in the hotel segment result mainly due to the negative impacts of the second revolution in Egypt that took
place in June2013 and that has negatively affected the flow of tourism to Egypt following several travel bans imposed by several
European countries.
There was a significant decrease in the real estate and construction segment mainly due to a decrease in real estate and construction
activity in Oman and El Gouna.
TOTAL
(i)
(2,271,486)
306,553
3,951,870
3,126,051
824,024
(4,234,803)
(39,339,604)
(32,547,229)
Impairment losses and provisions in relation to budget housing project in Haram City (notes 16 and 36)
(ii) Impairment losses in relation to Eco Bos Project in the UK (note 16)
(iii) Impairment losses in relation to investment in Garranah (note 20)
(iv) Impairment losses in relation to reversed sales from Iskan (note 44)
(v)
8 EMPLOYEE BENEFITS EXPENSE
1,283,684
This net gain represents the effect from the revaluation of the investment properties in Egypt (note 17) as well as the investment
properties in Mauritius, which have been reclassified as non-current assets held for sale (note 28).
(vi) Impairment losses in relation to reclassification of Sole project in Romania as disposal group (note 38)
CHF
Employee benefits expense
Thereof included in cost of sales
Thereof included in administration expenses
2013
2012
Restated
102,235,949
108,691,828
78,252,105
81,611,963
23,983,844
27,079,865
(vii) In 2013, the Sole project in Romania has been sold after it was reclassified as disposal group earlier in the financial period. The sale
resulted in a gain of sale of CHF 306,553 (note 38). In 2012 the Group disposed of its investment in one of the Omani subsidiaries due
to liquidation which resulted in a gain on sale of CHF 3,126,051 (note 38).
F-36
11 FINANCE COSTS
12.1 Board and Executive Compensation Disclosures as Required by Swiss Law
2012
Restated
CHF
2013
Interest on bank overdrafts and loans
(39,428,624)
(39,393,744)
(1,125,375)
(1,019,092)
(40,553,999)
(40,412,836)
9,528,481
31,820,572
Interest on call and put option arrangements
Total interest expense for financial liabilities not classified as at fair
value through profit or loss
Less: amounts included in the cost of qualifying assets (i)
TOTAL
F-38
2013 Annual Report
(31,025,518)
(8,592,264)
(i) The amount of capitalization cost of qualifying assets (project under construction and work in progress) has decreased compared to prior
year. This is mainly due to the deconsolidation of the Swiss operations (note 39) as well as decreased activities in relation to the current
hotel projects and real estate projects in Egypt and Oman, which are eligible for the capitalization of interest expense and the increase in
the weighted average capitalization rate.
The rate used by the Group to determine the amount of borrowing costs eligible for capitalization is 8.22% per annum (2012: 7.60% per annum).
Compensation in 2013
Gross value
of salaries
and fees
CHF
Gross
value of
cash
bonuses
Unrestricted shares
Other
benefits (car,
insurance)
Pension
contributions
Total remuneration
BOARD OF DIRECTORS
Samih Sawiris
Chairman
-
-
136,471
-
-
136,471
Franz Egle
Member
-
-
136,477
-
-
136,477
Member
-
-
132,285
-
-
132,285
Adil Douiri
Luciano Gabriel
1, 3
Member
-
-
-
-
-
-
Member
-
-
136,477
-
-
136,477
Member
-
-
136,477
-
-
136,477
Nicolas Cournoyer
4
Member
-
-
68,278
-
-
68,278
Eskandar Tooma 5
Member
-
-
132,285
-
-
132,285
Marco Sieber 5
Member
-
-
136,477
-
-
136,477
-
-
1,015,227
-
-
1,015,227
1,240,008
-
-
48,000
119,823
1,407,831
TOTAL BOARD OF DIRECTORS
EXECUTIVE MANAGEMENT
12 COMPENSATION OF KEY MANAGEMENT PERSONNEL
Gerhard Niesslein 2
Total other members of Executive Management
CHF
Salaries
Other short-term employee benefits
Post employment benefits
TOTAL COMPENSATION OF KEY MANAGEMENT PERSONNEL
2013
2012
5,121,333
4,473,530
299,220
761,309
262,896
255,531
5,683,449
5,490,370
There is a compensation plan in place for the Board of Directors which consists of a fixed compensation subject to an annual review. As to the
compensation of the members of Executive Management, the base salary is either (in case of members who have served in that capa city since
the Company was formed in 2008) carried over from their previous employment with Orascom Hotels & Development SAE, or (in case of
members appointed at a later time) determined in a discretionary decision of the CEO approved by the Nomination & Compensation
Committee. In respect of the bonus part of the compensation, proposals by the CEO are presented to the Nomination & Compensation
Committee which discusses such proposals and approves them if deemed fit.
The annual proposals and decisions concerning the compensation of the members of Executive Management are based on an evaluation of
the individual performance of each member, as well as of the performance of the business area for which each member is respons ible (in case
of the executive members of the Board, the performance of the Orascom Development Group as a whole). The CEO forms the respective
proposals in his discretion, based on his judgment of the relevant individuals' and business areas' achievements.
Total compensation of directors and Executive Management is part of the employees benefit expense allocated between cost of sales and
administrative expenses (see note 8).
3,881,325
-
-
251,220
143,073
4,275,618
TOTAL EXECUTIVE MANAGEMENT
5,121,333
-
-
299,220
262,896
5,683,449
TOTAL COMPENSATION OF KEY
MANAGEMENT
5,121,333
-
1,015,227
299,220
262,896
6,698,676
1
2
3
4
5
acting as Lead Director until May 2013
highest-compensated member of the Executive Management
until May 2013
until September 2013
since May 2013
Compensation in 2012
CHF
Gross value
of salaries
and fees
Gross
value of
cash
bonuses
Unrestricted
shares
Other
benefits (car,
insurance)
Pension
contributions
Total remuneration
BOARD OF DIRECTORS
Samih Sawiris
Chairman
85,333
-
85,333
-
-
170,666
Franz Egle
Member
85,333
-
85,333
-
-
170,666
Adil Douiri
Member
82,666
-
82,666
-
-
165,332
Luciano Gabriel
Member
98,666
-
98,666
-
-
197,332
Member
85,333
-
85,333
-
-
170,666
Member
85,333
-
85,333
-
-
170,666
Nicolas Cournoyer
Member
85,333
-
85,333
-
-
170,666
607,997
-
607,997
-
-
1,215,994
Gerhard Niesslein
1,240,008
-
-
48,000
112,179
1,400,187
Total other members of Executive Management
2,625,525
3,865,53
3
-
-
105,312
143,352
2,874,189
-
-
153,312
255,531
4,274,376
-
607,997
153,312
255,531
5,490,370
TOTAL COMPENSATION OF KEY
MANAGEMENT
4,473,53
0
A company which is among others owned by Mr. Samih Sawiris and a former member of the Board bought a property in 2010 that has been
leasing office space to the Group. The rent expenses paid to this company in 2013 amounted to CHF 837,290 (2012: CHF 847,137).
F-40
2013 Annual Report
13 Income taxes relating to continuing operations
12.2 Holding of Shares
2013
ODH shares
BOARD OF
DIRECTORS
Samih Sawiris1
Chairman
Franz Egle
2012
OHD
shares
ODH shares
13.1 Income tax recognised in profit or loss
OHD
shares
CHF
2012
Restated
2013
CURRENT TAX
17,914,355
-
17,907,121
-
Current tax (income)/expense for the current year
Member
28,572
-
16,776
-
Adjustments recognized in the current year in relation to the current tax of prior years
Adil Douiri
Member
15,735
-
7,520
-
Member
19,472
-
10,276
-
DEFERRED TAX
Member
18,166
-
8,970
-
Deferred tax (income)/expense recognized in the current year
Eskandar Tooma 2
Member
7,624
-
-
Deferred tax reclassified from equity to profit or loss
Marco Sieber 2
Member
8,800
-
-
Write-down of deferred tax assets
Luciano Gabriel 3
Member
-
-
9,656
-
Nicolas Cournoyer 4, 5
Member
-
-
639,746
-
18,012,724
-
18,600,065
-
-
-
-
-
-
TOTAL INCOME TAX EXPENSE RECOGNIZED IN THE CURRENT
YEAR RELATING TO CONTINUING OPERATIONS
4,027,640
6,110,045
-
-
4,027,640
6,110,045
5,313,539
5,008,073
-
-
11,361,809
-
16,675,348
5,008,073
20,702,988
11,118,118
Gerhard Niesslein 9
CEO
-
Ahmed El Shamy 6
CFO
-
CFO
see above
see above
-
Eskandar Tooma
6
Mahmoud Zuaiter
10
CEO Hotel
16,750
-
16,750
-
Julien Renaud-Perret
Chief Development Officer
6,000
-
6,000
-
Raymond Cron 7
Chief Operating Officer
-
-
400
-
Hamza Selim 8
Chief Destination Management
Officer
-
-
8,000
-
Aly Elhitamy
Chief Construction Officer
-
-
-
Stuart Siegel
Chief Real Estate Officer
-
-
-
30,374
-
31,150
The following table provides reconciliation between income tax expense recognized for the year and the tax calculated by applying the
applicable tax rates on accounting profit:
2012
Restated
CHF
2013
(Loss) before tax from continuing operations
(139,743,910)
(79,275,924)
Income tax benefit calculated at 16.43% (2012: 18.32%)
(22,960,865)
(14,527,275)
27,952,461
17,436,820
Unrecognized deferred tax assets during the year
Effect of income that is exempt from taxation
(3,012,581)
3,507,664
-
Reassessment of recoverability of deferred tax assets
11,361,809
-
Effect of expenses that are not deductible in determining taxable profit
7,362,164
4,700,909
-
INCOME TAX EXPENSE RECOGNIZED IN PROFIT OR LOSS
20,702,988
11,118,118
The average effective tax rate of 16.43% (2012: 18.32%) is the effective tax rate from countries in which the company generates taxable
profit.
1
total includes direct and indirect holding ownership as per note 29.4.
2
As at 15 May 2013 Eskandar Tooma and Marco Sieber were elected as new members of Board of Directors.
3
As at 15 May 2013 the term of Luciano Gabriel ended. He has decided not to stand for re-election
4
As at 30 September 2013 Nicolas Cournoyer has stepped down as member of the Board of Directors
CHF
5
The shares are held by investment funds managed or advised by Montpelier Investment Management LLP of which Mr. Cournoyer
is the Managing Director
DEFERRED TAX
6
As at 31 August 2013 Ahmed El Shamy has left the Group. Eskandar Tooma has been appointed as interim Group CFO
Remeasurement of defined benefit obligation
7
As at 30 June 2013 Raymond Cron has left the Group
8
As at 11 June 2013 Hamza Selim resigned from Executive Management as he has been appointed as country CEO of Oman
TOTAL INCOME TAX RECOGNISED IN OTHER COMPREHENSIVE
INCOME
9
As at 28 February 2014 Gerhard Niesslein has left the Group
10
As at 1 March 2014 Mahmoud Zuaiter has resigned from Executive Management as he has been appointed Managing Director of
Jordan Projects for Tourism Development (JPTD); an associate of the Group
13.2 Income tax recognized in other comprehensive income
Fair value measurement of hedging instruments entered into in a cash flow hedge
2012
Restated
2013
(112,467)
(140,519)
-
(43,719)
(112,467)
(184,238)
13.3 Current tax assets and liabilities
CHF
Current tax expense
Balance due in relation to the current tax of prior years
An amount of CHF 762,500 (2012: CHF 762,500) is due from key executives relating to the allocation of OHD shares in 2007 as detailed
in note 26.
Advance payment in relation to current tax of current year
No loans or credits were granted to members of the Board, the Executive Management or parties closely linked to them during 2013 and
2012.
CURRENT TAX LIABILITIES
Foreign currency difference
2013
4,027,640
2012
6,110,045
986,165
(1,689,949)
(593,558)
2,730,298
(559,455)
(362,628)
5,187,962
13.4 Deferred tax balances
13.5 Unrecognized deferred tax assets
Deferred tax assets and liabilities arise from the following:
Deferred tax assets not recognized at the reporting date:
2013
Opening
balance
Charged to
income
Recognized
in other
comprehensive income
Exchange
difference
CHF
Acquisition/
disposal of
Subsidiary
Closing
balance
ASSETS
Temporary differences
Property, plant & equipment
Cash flow hedges
10,767,353
(5,794,199)
(205,454)
-
-
-
Tax losses
15,243,884
937,208
(244,029)
-
(5,025,305)
10,911,758
Provisions
4,839,371
(4,127,676)
(424,050)
-
(287,645)
-
(873,533)
(112,467)
(134,168)
(5,447,118)
15,679,458
(8,984,667)
(112,467)
4,767,700
-
134,168
31,097,243
-
-
112,467
Pension plan
LIABILITIES
Investment property
31,227,168
6,610,666
(2,186,963)
-
(20,807)
35,630,064
9,096,162
677,618
(800,307)
-
(4,055,370)
4,918,103
-
402,397
(19,926)
-
-
382,471
37,221
-
-
-
-
37,221
40,360,551
7,690,681
(3,007,196)
-
(4,076,177)
40,967,859
9,263,308
16,675,348
(2,133,663)
112,467
1,370,941
25,288,401
Provisions
Pension plan
NET DEFERRED TAX
LIABILITY
2012
Restated
F-42
2013 Annual Report
Opening
balance
Charged to
income
Recognize
d in other
comprehe
n-sive
income
Exchange
difference
CHF
Acquisi
tion/
disposa
l of
Subsidi
ary
Closing balance
CHF
2013
2012
Tax losses in Parent Company (expiry in 2016) (i)
275,640,031
275,640,031
Tax losses in Parent Company (expiry 2018) (i)
846,695,821
846,695,821
1,032,630,753
1,032,630,753
29,383,250
-
Temporary differences in subsidiaries (ii)
229,117,480
316,992,509
(i) At 31 December 2012 the Parent Company’s tax losses amounted to CHF 2,154,966,605 which mainly related to tax losses caused by
impairment charges recognized on investments as a consequence of the recent restructuring of the Group. The historical cost value of
these investments was the fair value of the investments on the occasion of the stock market listing in Switzerland.
The Parent Company incorporated in Switzerland is a holding company and enjoys a privileged taxation for dividend income from
subsidiaries, as such income is tax exempted if certain criteria are met.
The Parent Company does not expect to have any substantial income streams other than tax exempted dividend income in the
foreseeable future and therefore it is not probable that the unused tax losses can be utilized. As a consequence and unchanged to prior
year, all of the tax losses accumulated in the Parent Company which amounted to CHF 2,184,349,855 at 31 December 2013 were
treated as unrecognized deferred tax assets.
(ii) At 31 December 2013, the Group has not recognised deferred tax assets for gains recognized at the subsidiaries level on intercompany
land sales which took place in 2010 in the amount of CHF 208,506,740 (31 December 2012: CHF 233,390,930). During 2012, the
Group has not recognised any deferred tax asset on the sale transaction as the development of this land either has not yet been started or
is still in the early stages of development and therefore it is not evident that future taxable profits are probable. The residual temporary
differences are unrecognized tax losses in subsidiaries which expire in 2017.
14 Discontinued operations
14.1 Description of discontinued operations
ASSETS
14.1.1 Deemed loss of control of ASA and its subsidiaries
On 25 June 2013 the Group lost control over ASA due to various capital increases in ASA in which the Group did not fully participate. For
further details regarding the capital increases and the corresponding deemed loss of control please refer to note 39.
Cash flow hedges
10,626,114
974,423
(833,184)
(140,519)
-
10,767,353
252,986
-
-
112,467
Tax losses
14,615,389
1,559,082
(930,587)
-
-
15,243,884
Provisions
5,174,793
26,044
(361,466)
-
-
4,839,371
154,164
23,723
-
(43,719)
-
134,168
30,823,446
2,583,272
(2,125,237)
(184,238)
-
31,097,243
27,531,272
5,498,221
(1,800,355)
-
8,827,675
1,047,801
(779,314)
-
-
9,096,162
37,221
-
-
-
-
37,221
36,396,168
6,546,022
(2,579,669)
-
(1,970)
40,360,551
5,572,722
3,962,750
(454,432)
184,238
(1,970)
9,263,308
Pension Plan
-
-
LIABILITIES
Investment property
Pension plan
NET DEFERRED TAX
LIABILITY
(1,970)
31,227,168
As ASA and its subsidiaries represent the entire Swiss operations of the Group, which is considered a major geographical area of operations
of the Group, the sold operations are recognized as discontinued operations and are presented accordingly.
14.1.2 Disposal of Tour Operations (2012)
As at 1 November 2012 OHD, a subsidiary of the Group, entered into shares sale and purchase agreements with Garranah family. Besides
reducing the ownership in several investments in associates, the Group sold their remaining subsidiary operating in the tour operations
business. Therefore the segment “tour operations” is considered a discontinued operation and is presented accordingly.
14.2 Analysis of loss for the period from discontinued operations
The result of the discontinued operation included in the consolidated statement of comprehensive income is set out below. The comparative
loss and cash flows from discontinued operations have been re-presented to include this operation classified as discontinued in the current
period.
2013 Annual Report
(5.29)
From discontinued operations
TOTAL BASIC AND DILUTED EARNINGS PER SHARE
(3.02)
(0.25)
(0.39)
(5.54)
(3.41)
The earnings from continuing operations and weighted average number of ordinary shares used in the calculation of basic and diluted
earnings per share are as follows:
CHF
2013
Loss for the year attributable to the equity holders of the Parent Company
(157,786,634)
Less: Loss for the year from discontinued operations
7,012,723
2012
Restated
(97,271,213)
11,023,986
Earnings from continuing operations (for basic and diluted earnings per share)
(150,773,911)
(86,247,227)
Weighted average number of shares for the purposes of EPS
28,495,780
28,516,898
(87,347,874)
1,010,915,131
-
(883,443)
(211,141,011)
(1,925,136)
84,590,928
1,227,621,667
(6,437,349)
6,936,223
(8,640,277)
212,987,731
71,325,436
(8,286,574)
(11,034,011)
116,064,932
482,843,252
(48,693,077)
(10,693,935)
6,936,223
(5,391,066)
-
(207,782,339)
(99,749)
(402,687)
(646,762)
(656,589)
(2,055,321)
-
-
78,979,990
845,140
-
-
-
-
-
(5,974,157)
(1,731,778)
350,530,106
80,743,840
(927,521)
(779,216)
2,039,423
(144,802)
-
120,757,557
Balance at 31 December 2013
From continuing operations
Foreign currency exchange differences
BASIC AND DILUTED EARNINGS PER SHARE
(1,545,157)
2012
Restated
2013
Sale and leaseback of assets
CHF
(236,205)
Basic earnings per share is calculated by dividing the earnings from continuing operations attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the year. For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. As the company does not have any dilutive
potential, the basic and diluted earnings per share are the same.
16 PROPERTY, PLANT AND EQUIPMENT
15 EARNINGS PER SHARE
-
(69,512)
Transfer to non-current assets held for sale
3,408,694
Derecognized on loss of control of subsidiaries
(2,083,163)
(84,848)
-
CASH FLOWS FROM DISCONTINUED
OPERATIONS
2,726,375
-
5,128,725
-
(46,896,412)
13,552,530
(133,551)
(23,785,208)
Net cash flows from financing activities
Disposals / transfers
Net cash flows from investing activities
Additions
(69,512)
132,031,193
45,176,381
36,050,845
8,149,515
Buildings
Net cash flows from operating activities
(195,635)
CASH FLOWS FROM DISCONTINUED
OPERATIONS
532,731,485
Tour Operations
131,585,043
2012 (restated)
ASA
529,380
ASA
Balance at 1 January 2013
2013
(1,012,342)
CHF
(5,348,730)
1,080,814
(9,665,786)
(12,104,800)
(2,482,463)
(7,012,723)
(1,210,766)
1,230,319
(37,431,633)
-
-
221,544
GAIN/(LOSS) FOR THE PERIOD FROM
Additions
Gain on deemed loss/disposal of discontinued operations
(8,095,926)
(1,259)
(149,505)
1,045,324
(12,104,800)
Derecognized on disposal of a subsidiary
1,055,743
(7,234,267)
Disposals / Transfers
Income tax
(3,474,928)
(148,246)
78,792,755
(13,150,124)
5,277,827
(8,290,010)
(3,274,921)
-
8,088,552
(110,141)
(333,671)
(2,467,290)
(10,004,389)
(15,201)
(983,728)
(6,819,476)
Finance costs
(Loss) after tax
(127,808)
Administrative expenses
(Loss) before tax
18,191
(707,052)
536,306,767
20,030
139,347,224
-
COST
Investment income
89,703
282,918,214
(2,123,203)
Assets under
finance lease
(1,475,363)
1,097,993
(1,008,290)
Property
under
construction
(2,228,192)
Furniture and
fixtures
Gross profit/(loss)
104,989
(5,275,684)
Plant and
equipment
3,800,321
Cost of sales
Freehold land
Revenue
(66,516,232)
Total
GAIN/(LOSS) FOR THE PERIOD FROM
(10,396,502)
Tour Operations
85,102,006
ASA
128,739,359
2012 (restated)
ASA
138,558,180
2013
CHF
CHF
1,182,232,391
F-44
17 INVESTMENT PROPERTY
The following table summarizes movements, which have occurred, during the current reporting period, on the carrying amount of investment
property.
CHF
2013
2012
FAIR VALUE OF COMPLETED INVESTMENT PROPERTY
Balance at the beginning of the year
Transfer to assets held for sale
Revaluation gain/(loss)
Foreign currency translation adjustment
Balance at the end of the year
78,903,321
76,366,131
(68,845,434)
-
192,176
3,951,870
(263,445)
(1,414,680)
9,986,618
78,903,321
The fair values at 31 December 2013, which exclude the investment properties of CMAR (see note 28 for details), were determined based
on an internal valuation model. The last external valuations were prepared as at 31 December 2012 by Fincorp, an accredited valuation
specialist in Egypt.
The internal valuation model relies on the Discounted Cash Flow (DCF) method to determine the fair value of the investment property. The
Discounted Cash Flow (DCF) approach describes a method to value the investment property using the concepts of the time value of money.
All future cash flows are estimated and discounted to give them a present value. This valuation method is in conformity with the International
Valuation Standards. The same method was used for any previous external valuations. As investment property only consists of a few
properties in Egypt, management has decided to use an internal valuation model due to efficiency and cost saving reasons.
For the valuation of the investment property which is situated in Egypt the model used cash flow projections based on financial budgets for the
next five years and an average discount rate of 20.0% (cost of equity). For the terminal value a perpetual growth rate of 3% was used.
As at 31 March 2013 the investment properties of CMAR were reclassified as non-current assets held for sale. For further details refer to
note 28. The Group’s remaining investment properties are located in Egypt.
All of the Group’s investment property is held under freehold interests. The following table summarizes income and direct operating
expenses from investment properties rented out to third parties.
CHF
Rental income from investment properties (i)
Direct operating expenses (including repairs and maintenance) arising from investment
properties that generated rental income during the period
(i)
2013
2012
6,463,392
6,170,558
218,597
1,689,212
See note 7.1 for further information on the Group’s rental income.
18 GOODWILL
CHF
Cost
In 2012 no impairment losses were recognized.
The impairment review of the Eco Bos project in the UK resulted in an impairment loss of CHF 10.9 million which is mainly due to capitalized cost for which no future benefit can be expected. Further, the impairment
review of the budget housing project in Haram City resulted in an impairment loss of CHF 4.3 million within property, plant and equipment. The impairment losses are shown as other gains/losses (note 10).
At 31 December 2013, property, plant and equipment (PPE) of the Group with a carrying amount of CHF 86.7 million (31 December 2012: CHF 70.3 million) were pledged to secure borrowings of the Group as
described in note 33. See note 11 for the capitalized finance cost during the year.
1,002,981,620
766,992,221
-
5,838,534
202,104,809
350,530,106
27,984,059
14,370,108
34,621,543
48,835,175
444,047,237
389,299,670
120,757,557
131,585,043
At 31 December 2012
At 31 December 2013
243,922,910
1,097,689
10,882,922
56,955,328
81,443,389
93,543,582
-
CARRYING AMOUNT
15,139,935
(23,747,834)
-
10,882,922
-
(3,852,631)
(9,667,866)
4,257,013
(10,227,337)
-
-
8,856,104
9,482,869
Depreciation expense
Sale and leaseback of assets
-
11,400,108
-
(228,333)
(121,525)
(621,435)
(83,052)
(19,344)
Transfer to non-current assets held for sale
(136,369)
(443,224)
(587,094)
(237,578)
(59,153)
(408,901)
-
Eliminated on disposals of assets
52,759,781
(3,752,390)
(6,143,093)
83,196,018
88,684,248
(6,102,790)
-
9,589,990
10,820,182
14,082,187
Depreciation expense
(2,928,395)
(760,529)
(1,456,943)
(1,099,883)
(58,185)
(420,308)
-
Eliminated on disposals of assets
50,611,105
81,075,755
81,183,344
ACCUMULATED DEPRECIATION AND IMPAIRMENT
Impairment expense
30,132,283
393,202
-
-
(369,202)
-
-
704,487
(433,100)
(1,439,219)
-
-
(15,998,273)
224,640,047
-
-
-
34,492,359
-
(2,637,780)
(4,086,463)
-
-
-
212,870,204
-
-
Total
Assets under
finance lease
Property
under
construction
Furniture and
fixtures
Plant and
equipment
Buildings
Freehold land
CHF
F-46
2013 Annual Report
2013
2012
6,553,348
Accumulated impairment losses
7,331,756
-
Carrying amount at end of year
6,553,348
CHF
2013
7,331,756
2012
COST
Balance at beginning of year
7,331,756
Effect of foreign currency exchange differences
(778,408)
Balance at end of year
6,553,348
7,951,210
(619,454)
7,331,756
2013 Annual Report
19 SUBSIDIARIES
18.1 Allocation of goodwill to cash-generating units
Annual test for impairment
An impairment test of goodwill was performed by the Group in order to assess the recoverable amount of its goodwill. No impairment was
recorded as a result of this test. All cash-generating units were tested for impairment using the Discounted Cash Flow (DCF) method in
accordance with IFRS.
The Group has control over all the subsidiaries below either directly or indirectly through subsidiaries controlled by the Parent Company.
Details of the Group’s significant subsidiaries at the end of the reporting period are as follows:
Country – Company name
The Group’s business segments have been identified as cash–generating units. The DCF model utilized to evaluate the recoverable amounts
of these units was based on a five year projection period. A further description of the assumptions used in the model is given in the following
paragraphs.
Domicil
e
FC
Share/paidin capital
The carrying amount of goodwill that has been allocated for impairment testing purposes is as follows:
CHF
Segment
Hotel companies *
Hotels
2013
6,553,348
6,553,348
2012
7,331,756
7,331,756
*Each subsidiary considered separately
Proportio
n of
ownership
interest
and voting
power
held by
the Group
Segment
HO
*
Egypt
Abu Tig for Hotels Company
Red Sea
EGP
2,550,000
98.58%
2
Accasia for Hotels Company
Cairo
EGP
25,000,000
99.16%
5
Arena for Hotels Company S.A.E
Cairo
EGP
20,000,000
100.00%
4
Azur for Floating Hotels Company S.A.E
(ii)
Cairo
EGP
3,000,000
50.84%
5
Captain for Hotels Company
Red Sea
EGP
768,750
59.69%
3
Hotels
El Dawar for Hotels Company
Cairo
EGP
9,560,000
99.16%
3
As already mentioned, Egypt has been on the brink of social and political turmoils in the past few years. While the Egyptian uprising has come
with the promise of major political reform, it has led to the temporary disruption of economic activity. Looking beyond the current crisis, Egypt
can benefit from maintaining its current momentum towards economic liberalization, privatization, and a more efficient government. This will
improve Egypt’s economic position and help foster a sustained growth once the inevitable global economic upturn materializes. In light of the
previously mentioned analysis, the impairment model has taken the current economical situation of Egypt into close consideration.
El Khamsa for Hotels & Touristic
Establishments
El Golf for Hotels Company & Touristic
Establishments
Red Sea
EGP
48,000,000
99.97%
Cairo
EGP
19,000,000
99.16%
5
El Gouna for Hotels Company S.A.E
Cairo
EGP
79,560,000
70.12%
5
El Gouna Hospital Company
Red Sea
EGP
19,000,000
75.23%
The recoverable amount of each cash-generating unit has been determined based on a value in use calculation which uses cash flow
projections based on the financial budgets approved by management covering a ten-year period that consists of two phases. The first phase is
a 5-year period which shows the evolving status of the hotel segment indicated by being back to the operating standards of before the 2011
revolution. And the second phase is a 5-year period which shows the steady performance of the hotel operation. An average discount rate of
20.0% per annum (2012: 18% per annum) was used for the value in use calculation. The discount rate is based on a risk free interest rate of
10.0%, a beta of 1.00 as well as a risk premium of 10.0%. An average occupancy rate of 75% - 80% was used for the calculations at the end of
phase one.
El Gouna Services Company
Red Sea
EGP
250,000
99.68%
El Mounira for Hotels Company S.A.E
Red Sea
EGP
13,000,000
64.46%
4
El Tebah for Hotels & Touristic
Establishments Company
Cairo
EGP
52,000,000
70.12%
5
El Wekala for Hotels Company
Cairo
EGP
39,000,000
74.58%
4
International Company for Taba Touristic
Projects (Taba Resorts)
Cairo
EGP
96,000,000
64.47%
5
International Hotel Holding
Cairo
EGP
452,367,300
99.16%
Cairo
EGP
19,250,000
59.50%
4
Cairo
EGP
26,000,000
100.00%
4
Med Taba for Hotels Company S.A.E
Cairo
EGP
51,000,000
66.57%
4
Sensitivity analysis where the average discount rate was increased by 4.5% and the growth rate reduced by 0.5%, which according to
management is a reasonably possible change in key assumptions, did not cause the aggregate carrying amount to exceed the aggregate
recoverable amount of the cash-generating unit.
Misr El Fayoum for Touristic Development
Company S.A.E
Cairo
EGP
28,000,000
67.06%
Mokbela for Hotels Company S.A.E
Cairo
EGP
85,000,000
81.87%
Orascom Hotels & Development S.A.E
Cairo
EGP
1,109,811,630
99.68%
Furthermore, management believes that any reasonably possible change in the key assumptions (sensitivity analysis) on which the
recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cashgenerating unit.
Orascom Housing Communities (OHC)
Cairo
EGP
185,000,000
69.34%
Haram City for Constructions and
Services S.A.E
Cairo
EGP
1,500,000
69.56%
Orascom Housing Company
Cairo
EGP
22,000,000
99.68%
Paradisio for Hotels & Touristic
Establishments Company S.A.E
Red Sea
EGP
18,500,000
99.16%
4
Rihana for Hotels Company S.A.E
Red Sea
EGP
13,000,000
59.50%
4
Red Sea
EGP
50,000,000
74.26%
Cairo
EGP
50,000,000
59.61%
4
Taba First Hotel Company S.A.E
Cairo
EGP
105,000,000
59.57%
5
Taba Heights Company S.A.E
South
Sinai
EGP
157,510,000
98.65%
Tamweel Leasing Finance Co. ILC
Cairo
EGP
30,000,000
79.70%
Cairo
EGP
100,000,000
87.66%
Cairo
EGP
68,000,000
99.16%
Cash flow projections during the budget period were based on management’s expected growth rates for each hotel within the cashgenerating unit. The cash flows beyond that five year period were extrapolated using a growth rate of 3%. For the terminal value calculation,
normalized cash flows were used taking into consideration the sufficiency of projected capital expenditure versus depreciation.
No impairment loss (2012: CHF nil) was recognized due to impairment test described above.
Marina 2 for Hotels & Touristic
Marina 3 for Hotels & Touristic
Roaya for Tourist & Real Estate
Development SAE
Royal for Investment & Touristic
Development S.A.E
Tamweel Mortgage Finance Company
S.A.E
Tawila for Hotel Company S.A.E
5
5
R&
C
LS
DM
Othe
r
HQ
F-48
Country – Company name
Domicile
FC
Share/paid
in capital
Proportio
n of
ownership
interest
and voting
power
held by
the Group
19.1. Details of non-wholly owned subsidiaries that have material non-controlling
interests
Segment
The table below shows details of non-wholly owned subsidiaries of the Group that have material non-controlling interests:
HO*
R&C
LS
DM
Other
HQ
Name of subsidiary
Jordan
Golden Beach for Hotels
Company
F-50
2013 Annual Report
Aqaba
JOD
8,200,000
100.00%
4
Proportion of ownership
interest and voting
power held by noncontrolling interests
31/12/2013
31/12/2012
Mauritius
Sifah Tourism Development Co.
30.00%
30.00%
Club Méditerranée Albion
Resorts Ltd (i)
Club Mediterranee Albion
Resort
87.60%
87.60%
Port-Louis
EUR
20,000,000
12.40%
Montenegro
Individually immaterial subsidiaries with non-controlling interests
Lustica Development Ad
Podgorica
TOTAL
Podgorica
EUR
25,000
90.00%
Oued Chibika Development (SA)
Casablanca
MAD
286,117,692
64.99%
Chbika Rive Hotel
Casablanca
MAD
66,000,000
65.00%
Muscat
OMR
4,350,000
70.00%
Muscat
OMR
7,500,000
70.00%
Muscat
OMR
16,600.000
70.00%
Profit/(loss) allocated
to non-controlling
interests
31/12/2013
Accumulated
non-controlling interests
31/12/2012
(3,749,116)
3,555,404
31/12/2013
31/12/2012
(3,051,661)
20,511,917
24,713,432
(11,294)
41,075,870
36,935,166
157,386,925
174,235,186
218,974,712
235,883,784
Morocco
UC
Summarised financial information in respect of each of the Group’s subsidiaries that has material non-controlling interests is set out below.
The summarised financial information below represents amounts before intragroup eliminations.
Oman
Madrakah Hotels Management
Company LLC
Muriya Tourism Development
Company (S.A.O.C)
Salalah Beach Tourism
Development Company (S.A.O.C)
Sifah Tourism Development
Company (S.A.O.C)
Wateera Property Management
Company LLC
Sifah
Muscat
OMR
17,700,000
70.00%
Muscat
OMR
270,000
70.00%
Ras al
Khaimah
AED
7,300,000
73.00%
Cornwall
GBP
31/12/2013
Current assets
CMAR
31/12/2013
31/12/2012
31/12/2012
135,328,863
154,398,954
4,009,242
3,929,484
Non-current assets
30,269,685
23,054,999
70,120,082
67,934,846
Current liabilities
(97,124,726)
(114,066,168)
Non-current liabilities
(100,766)
-
(3,835,932)
(3,768,423)
(23,403,130)
(25,264,325)
Equity attributable to owners
(47,861,139)
(44,371,450)
(5,814,392)
(5,311,116)
(20,511,917)
(19,016,335)
(41,075,870)
(37,520,466)
United Arab Emirates
RAK Tourism Investment FZC
5
Profit/(loss) for the year
United Kingdom
Eco-Bos Development Limited
(i)
10,000,000
75.00%
The Group has control over the Club Méditerranée Albion Resorts Ltd through a call and put option as described innote 35.
Abbreviations:
HO
Hotels
R&C
LS
Land sales
DM
HQ
Headquarter or not yet operational
Other
Other operations
*
Number of stars the hotel holds
UC
Hotel under construction
Revenue
attributable to owners
attributable to non-controlling
interests
Net cash inflow/(outflow)
from operating activities
7,767,674
11,128,539
5,432,791
5,131,685
(12,497,057)
(10,172,204)
4,058,680
(12,893)
(8,747,940)
(7,120,543)
503,276
(1,599)
(3,749,117)
(3,051,661)
3,555,404
(11,294)
(2,019,876)
(21,651,530)
from investing activities
350,599
from financing activities
19,281,055
2,943,274
(3,761,638)
6,831,734
(126,822)
(57,127)
1,069,722
3,812,945
3,205,198
-
-
(3,870,072)
(2,135,476)
Except for exchange differences arising on translating the foreign operations there are no other items of other comprehensive income.
2013 Annual Report
20 INVESTMENTS IN ASSOCIATES
Reconciliation of the above summarised financial information to the carrying amount of the interest in ASA recognised in the consolidated
financial statements:
Details of the Group’s associates at the end of the reporting period are as follows:
Name of associate
Place of
incorporation
2013
Proportion of
ownership interest and
voting power held by
the Group
2013
Andermatt Swiss Alps AG (i)
Net assets of the associate (including adjustments on OHD-group level; excluding noncontrolling interests)
Carrying value
(CHF )
2013
Proportion of the Group’s ownership interest in ASA
Carrying amount of the Group’s interest in ASA
2012
Switzerland
49.00%
99,079,109
-
Jordan Company for Projects and Touristic
Development (ii)
Jordan
15.64%
4,554,070
6,092,150
Orascom for Housing and Establishments (iii)
Cairo
39.90%
-
1,113,972
International Stock Company for Floating Hotels
& Touristic Establishments (iv)
Cairo
30.00%
-
107,587
Mirotel for Floating Hotels Company (iv)
Cairo
30.00%
-
21,517
Tarot Garranah & Merotil for Floating Hotels (iv)
Cairo
30.00%
-
96,829
Tarot Tours Company (Garranah) S.A.E (iv)
Cairo
30.00%
-
3,555,767
Al Tarek for Tourist & Hotel Cruises
Cairo
30.00%
-
5,379
-
7,859,634
103,633,179
18,852,835
Andermatt-Sedrun Sport AG (v)
202,202,263
-
49%
-
99,079,109
-
(ii) Jordan Company for Projects and Touristic Development (JPTD)
JPTD is investing in property, destination management and development in Aqaba in Jordon. Since 2008 the Group exercised significant
influence with their two active board members out of eleven leading to changes in the JPTD’s Executive Management and provision of
essential technical information. The proportion of ownership interest held by the Group at 31 December 2013 is unchanged to prior year.
(iii) Orascom for Housing and Establishment
Switzerland
TOTAL
(i) Andermatt Swiss Alps AG
On 25 June 2013 the Group lost control over Andermatt Swiss Alps AG (“ASA”) due to various capital increases in ASA in which th e Group
did not fully participate. With a remaining share of interest of 49% in ASA, the investment is classified as investment in associates. For further
details regarding the capital increases and the corresponding deemed loss of control refer to note 39.
The fair value of ASA on initial recognition as investment in associates is based on a third-party valuation which supported the transaction
price paid by Mr. Samih Sawiris.
In December 2013 ASA has opened the Chedi Hotel in Andermatt, which is the first hotel of the development project.
ASA has obligations towards the canton of Uri and the municipality of Andermatt. ASA is responsible for the construction of certain parts of
the tourism resort Andermatt. Within certain periods of time or should the construction work be stopped for whatever reason, ASA has the
obligation to rebuild the relevant plots of land to the original state. As at 31 December 2013, 36,985 ASA shares owned by the Company
(2012; 36,985) have been pledged as a security to the canton and municipality.
Summarised financial information in respect of ASA is set out below:
2013
2012
Current assets
195,313,568
-
Non-current assets
252,951,675
-
Current liabilities
(179,257,610)
-
(81,387,102)
-
Revenue for the period
50,716,932
-
Profit/(loss) for the period
(18,312,860)
-
The company develops real estate and housing projects located in Egypt for the low cost sector. The proportion of ownership interest held by
the Group at 31 December 2013 is unchanged to prior year. In 2013, the investment was reduced to CHF nil as the losses in their last
financial statements exceeded the carrying amount of the investment.
(iv) ODH investments in Garranah Group subsidiaries
2013
The Group continues to hold a 30% interest in the four operating floating hotels and a tour operator entity of the Garranah Group. As at 31
December 2013, the residual carrying amount of the investments in Garranah were fully impaired and an impairment loss of CHF 4.6 million
was recognized in the statement of comprehensive income as “other gains and losses” as described in note 10.
Impairment 2012
During 2012 an impairment loss of CHF 12.2 million was recognized in the statement of comprehensive income as “other gains and losses” as
described in note 10. The recoverable amount was determined using a DCF-model based on the latest financial performance and financial
forecasts of Garranah for five years. The discount rates used were between 14% and 17% and the growth rates used were based on market
expectations. As at 31 December 2012 no further impairment was necessary.
Sale of 15% stake in Garranah investments in 2012
On 1 November 2012, the Group signed a share sale and purchase agreement to sell to the Garranah family an additional 15% stake in five
investment whereof four are operating floating hotels (International Stock Company for Floating Hotels & Touristic Establishments, Mirotel
for Floating Hotels Company, Tarot Garranah & Merotil for Floating Hotels, El Tarek for Nile Cruises & Floating Hotels) and one is active as a
tour operator (Tarot Tours Company (Garranah) SAE). The company that provides tour transportation services (Tarot Garranah for Touristic
Transportation) has been sold completely.
Pursuant to this agreement, the Group’s interest in the four operating floating hotels and the tour operator decreased from 45 to 30 percent
however the Group keeps its significant influence over these investments in associates. All interests held in the company providing tour
transportations services have been sold. Legal procedures to transfer title were still in process at year end.
Losses on disposal of the 15% stake in Garranah Group entities of CHF 6.4 million were recognized on sale of the 15% stake. However, as
such losses were already recognized as indirect impairment through provisions based on the estimated sales price in the third quarter of
2012, they are shown as impairment and not as loss from disposal of part of the investments in associates. Together with the gains from the sale
of the tour transportation services company these losses were recognised through “other gains and losses” (refer to note 10 for further
details).
(v) Andermatt-Sedrun Sport AG
(245,138)
-
Total comprehensive income for the period
(18,557,998)
-
Group’s share of profit/(loss) for the period
(9,093,419)
Other comprehensive income for the period
2012
2013
Andermatt-Sedrun Sport AG is held directly by ASA. As ASA was deconsolidated in the second quarter of 2013, the investment in ASS has
been derecognized in the consolidated financial statements of the Group. However, it is still included in the carrying amount of ASA which is
shown as investment in associates. For further details refer to note 39.
2012
As further explained in note 39, the Group lost control over its investment in Andermatt-Sedrun Sport AG (“ASS”) however with a 40.26%
interest still has significant influence. The investment in associates is accounted for at its fair value on transaction date plus the share of
gains/losses of ASS since the transaction date. The fair value of ASS was assessed by using a DCF model for its investment in the skiing area,
which is the main asset of ASS. The DCF valuation is based on a five year business plan and a relatively low discount rate of 5.5% which is due
to favourable long-term government financing. In connection with the acquisition of the skiing areas a total loss of CHF 1.9m resulted from this
transaction. See note 39 for further details.
F-52
2013 Annual Report
Aggregate financial information in respect of the Group’s associates that are not individually material is set out below:
(i) Certificates – mutual fund
The Group holds certificates in Mutual Funds and these certificates are recorded at their redemption price at year end.
CHF
2013
2012
Total assets
55,434,933
180,574,514
Total liabilities
(29,433,029)
(132,846,883)
Net assets
26,001,904
Group’s share of net assets of individually not material associates
On 22 July 2013 the Group sold its stake in N.C.H.R. keeping a minimal investment of 500 shares. The exit transaction resulted in sales
proceeds of CHF 24.0 million. The accumulated losses of CHF 11.3 million were reclassified from investment revaluation reserve to
retained earnings. Proceeds were used to pay back borrowings (see note 33 for further details).
47,727,631
10,260,11
12,904,901
Total revenue
3,382,703
(4,614,320)
Total (loss) for the period
(8,181,090)
(2,997,425)
(1,371,034)
(907,733)
Group’s share of profit/(loss) of individually not material associates
(ii) Nasr City Company for Housing & Development (N.C.H.R.)
(iii) Egyptian Resort Company
The investment in Egyptian Resort Company (“ERC”) remains unchanged to prior year. The company is acting as the developer of the
hotel and real estate project in Sahel Hashish (Egypt). Since March 2011, ERC is involved in a dispute with the General Authority for
Tourism and Development (“GATD”).
In general the stock market in Egypt has weakened in 2013 following the significant recovery in 2012. However, due to low turnover, the
markets are still very volatile. In line with this overall downtrend the fair value of ERC has decreases by CHF 0.3 million after it witnessed
significant gains in 2012.
21 NON-CURRENT RECEIVABLES
CHF
2013
2012
Trade receivables
10,175,696
47,273,333
Notes receivable
22,433,859
26,846,506
32,609,555
74,119,839
TOTAL
(iv) Falcon Company for hotels
The financial statements of Falcon Company for Hotels (“Falcon”) were incorporated into ODH’s consolidated financial statementsat 31
December 2008 in accordance with the International Financial Reporting Standards, as a result of the business combination previously
effected through one of ODH’s subsidiaries whereby control had existed over Falcon at that time. Subsequent to the first time
consolidation, but prior to the completion of the transfer of the legal title on the Egyptian Stock Exchange (EGX), a dispute over the
Falcon securities purchase agreement had arisen. At the beginning of October 2009, the Group ceased consolidating Falcon due to
changes in Falcon’s management resulting in a loss of control for the Group which was one of the reasons of the dispute. Management
believes that the carrying amount of this investment is the best estimate of its fair value as at 1 January 2011 and any period since then.
Non-current receivables include long term receivables for real estate contracts, which will be collected over an average collecting period of
5.5 years (2012: 5.5 years). Accounts receivables from the mortgage company (Tamweel Mortgage Finance Company S.A.E.), one of OHD
subsidiaries, were reclassified as disposal Group in 2013. For further details refer to note28. None of these non-current receivables
impaired and/or overdue.
In 2012, Tamweel Mortgage Finance Company S.A.E. has pledged trade receivable with carrying amount of CHF 18.7 to secure borrowings
(note 33).
23 INVENTORIES
22 OTHER FINANCIAL ASSETS
Details of the Group’s other financial assets are as follows:
CHF
Current
2013
2013
291,121
-
-
Nasr City company for Housing & Development (N.C.H.R.) (ii)
-
-
1,748
27,447,108
Egyptian Resort Company (iii)
-
-
6,845,395
7,116,022
Green Power Uri AG
-
-
-
30,000
Andermatt-Urserntal Tourismus GmbH Investments
-
-
-
5,000
Reclaim Limited
-
-
1,108,473
1,090,854
Falcon for Hotels SAE (iv)
-
-
17,816,404
18,257,402
Egyptian Mortgage Refinance Company
-
-
-
143,450
Camps and Lodges Company
-
-
32,055
35,863
Palestine for Tourism Investment Company
-
-
21,960
24,569
El Koseir Company
-
-
436
488
Sasso San Gotthardo
-
-
-
125,000
Golfplatz Sedrun AG
-
-
-
7,300
Luzern Tourismus AG Investments
-
-
-
36,000
-
7,958,036
-
-
463
8,249,157
25,826,471
54,319,056
Financial assets carried at fair value through
other comprehensive income (FVTOCI)
Financial assets carried at amortized cost
TOTAL
Construction work in progress (i)
222,464,129
371,424,475
67,416,226
71,318,624
TOTAL
463
Bonds issued by the Egyptian Government (14%, 3 December 2013)
2012
Other inventories (iii)
2012
Financial assets carried at fair value through profit or loss (FVTPL)
Held for trading non-derivative financial assets - certificates of mutual
funds (i)
2013
Land held for development under purchase agreements (ii)
Non-current
2012
CHF
(i)
67,436,700
56,384,331
357,317,055
499,127,430
This amount includes real estate construction work under progress. The real estate units are sold off plan. The decrease is mainly due to
the deconsolidation of the Swiss subsidiaries. For further details on the net realisable value of construction work in progress refer to note
4.2.10.
(ii) In 2008, the finance leases between OHD and General Authority for Touristic and Development (“GATD”) for development of land
were terminated and replaced with purchase agreements with GATD. On May 2008, OHD signed a new purchase agreement with
GATD to purchase a plot of land and paid a down payment of 27% and the remaining balance is payable in equal annual instalment
commencing upon the expiry of the grace period of three years. In addition, OHD is required to pay an annual interest at the rate of 5%
after the grace period with each instalment.
The value of land shown above is for those plots of land assigned for development and not yet sold by OHD.
(iii) This amount includes hotels inventory of CHF 19.5 million (2012: CHF 21.8 million) as well as completed but unsold units of CHF 47.9
million (2012: CHF 34.6 million)
In 2013 the following material write-downs of inventory were recognised:
Impairment review of real estate projects in Oman showed that for some real estate units the expected market price is below its
construction costs. Therefore impairment write-down of CHF 4.9 million has been recognized within cost of sales.
There were no material write-downs or reversal of write-downs of inventory in 2012.
F-54
24 TRADE AND OTHER RECEIVABLES
CHF
Trade receivables (i)
Notes receivable
Allowance for doubtful debts (see below)
TOTAL
25.2 Amounts receivable under finance lease
2013
Minimum lease payments
2012
49,087,641
29,088,996
(25,971,712)
52,204,925
102,599,397
-
7,667,979
-
4,376,243
Later than one year and not later than five years
-
22,460,952
-
17,189,670
Later than five years
-
638,241
-
552,414
-
30,767,172
-
22,118,327
90,265,697
2013
2012
Impairment losses recognised on receivables
(1,008,962)
(20,739,967)
Amounts written off during the year as uncollectable
14,686,894
-
-
-
-
22,118,327
The interest rate inherent in the leases is fixed at the contract date for the entire lease term. The average effective interest rate contracted
was approximately 16% per annum as at 31 December 2012.
26 OTHER CURRENT ASSETS
CHF
2013
2012
20,644,510
33,934,262
707,985
-
20,605,059
10,836,547
2,373,002
(922,015)
4,243,865
5,603,634
(25,971,712)
(42,730,631)
Deposit with others
3,612,777
3,823,240
Prepaid expenses
3,287,481
3,968,603
Prepaid sales commissions related to uncompleted units
3,063,017
8,716,562
Letters of guarantee – cash margin
2,995,786
2,091,455
Amounts due from employees and the management team (iii)
2,004,270
1,831,250
Urban development authority
489,800
990,199
Accrued revenue
447,446
1,891,169
Cash imprest
274,769
285,667
38,113
42,605
61,706,893
74,015,193
2013
2012
Less than 30 days
7,893,198
14,382,236
Between 30 to 60 days
4,001,179
7,805,512
1,051,388
1,440,704
756,557
1,517,196
11,316,669
11,233,753
25,018,991
36,379,401
TOTAL
(8,648,845)
22,118,327
Advance to suppliers (ii)
Aging of receivables that are past due but not impaired:
More than 120 days
-
Other debit balances (i)
Included in the Group’s trade and other receivable balance are debtors with a carrying amount of CHF 25,018,991 (2012: CHF
36,379,401) which are past due but not impaired at the reporting date. The Group has not built an allowance for impairment loss for the past
due amounts reported below as there has not been a significant change in credit quality and the amounts are still considered re coverable (see
note 42).
CHF
-
Present value of minimum lease payments
2,059,010
Impairment losses reversed (allowance no longer used)
Less: unearned finance income
The finance lease receivables as at 31 December 2012 included CHF 110,041 which were past due. None of these were impaired.
(23,127,659)
Foreign exchange translation gains and losses
2012
Not later than one year
(42,730,631)
Reclassified to assets held for sale
2013
30,396,931
Movement in the allowance for doubtful debt:
CHF
Present value of
minimum lease payments
2013
2012
(42,730,631)
(i) Trade receivables decreased mainly due to the reclassification of Tamweel a disposal group (note 28).The average credit period on sales
of real-estate is 5.5 years. No contractual interest is charged on trade receivables arising from the sale of real estate units . Interest is only
charged in case of customers default. The Group has recognised an allowance for doubtful debts of 53% (2012: 42%) based on individual
bad debts and allowances due to past due amounts. Allowances for doubtful debts are recognised against trade receivables based on
estimated irrecoverable amounts determined by reference to past default experience of the counterparty and an analysis of the
counterparty's current financial position.
CHF
F-56
2013 Annual Report
Withholding tax
Down payments for investments
TOTAL
(i) Included in other debit balances as at 31 December 2013 is an amount of CHF 10.2 million which is the value of OHC withdrawn land
amounting to CHF 8.7 million as well as infrastructure expenditures located on the withdrawn land in Fayoum amounting to CHF 1.5
million.
(ii) Advance to suppliers mainly relates to advances paid in Oman.
25 FINANCE LEASE RECEIVABLES
CHF
2013
2012
Current finance lease receivables
-
4,376,243
Non-current finance lease receivables
-
17,742,084
TOTAL
-
22,118,327
25.1 Leasing arrangements
Tamweel Leasing Finance Co., a subsidiary of the Group entered into finance lease arrangements for buildings, cars, equipment, computer
hardware and software as a lessor. All leases are denominated in EGP. The average term of finance leases entered into was ten years. In 2013
Tamweel Leasing Finance Co. was reclassified as disposal group. For further details refer to note 28. Except for the reclassified leasing
arrangements of Tamweel Leasing Finance Co., there are no further leasing arrangements within the Group.
(iii) This amount is due from employees and management team including executive board members as a result of receiving two million OHD
shares in 2007. These shares were previously issued based on a general assembly resolution in OHD dated 13 February 2006
authorizing the company to issue 2 million shares at par to be used to allocate to employees and management team (see note 44). All of
these shares were swapped at a rate of 1:10 for ODH shares in 2008. On one side payment of the share price was deferred and payback
period was extended each year, on the other side employees and management were instructed not to sell their unpaid shares. Due to the
fact that the share price decreased substantially since the allocation of the shares, provisions against these receivables were recognized
in 2011 and 2012. In March 2013, the terms and conditions of the final settlement were ultimately determined by the Board of Directors
based on the share price as at 31 December 2012. This resulted in an amount of CHF 1,831,250 (2012: 1,831,250) which is due from
employees and management team including executive board members and a residual provision of CHF 1,068,750 (2012: CHF
1,068,750). All other amounts due were netted off. The reduction in the amount due from employee and management is not considered
remuneration as the shares were not ready for use until this final settlement agreement. Therefore only the issuance of shares to the
employees and management in 2007 should be regarded as remuneration.
27 CASH AND CASH EQUIVALENTS
For the purposes of the consolidated cash flow statement, cash and cash equivalents include cash on hand, demand deposits and balances at
banks. Cash equivalents are short-term, highly liquid investments of maturities of three months or less from the acquisition date, that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Cash and cash equivalents at year end as shown in the consolidated statement of cash flows can be reconciled to the related items in the
consolidated statement of financial position as follows:
CHF
Cash and cash equivalents included in non-current assets held for sale
Balance at the end of the year
F-58
2013 Annual Report
2013
28 NON-CURRENT ASSETS HELD FOR SALE
CHF
73,310,785
101,668,196
7,940,431
-
81,251,216
101,668,196
Related to CMAR (i)
Total non-current assets held for sale
Related to CMAR (i)
Related to Tamweel (ii)
Following the political turmoil in Egypt and other Arab countries the market segments where the group operates became severely affected.
The Group’s real estate and hotel operations in Egypt initially suffered significantly. Oman destinations have been facing a reduction in
tourism and real estate revenues due to secondary impact of the Arab spring and the slowdown of the Gulf Cooperation Council (GCC)
economies; a trend that is now reversing in the GCC countries. Accordingly, the operating cash flows of the group have significantly
decreased in the last three years. Key indicators in Egypt have also started to show initial signs of slow recovery.
Total liabilities associated with non-current assets held for sale
Although there is certain flexibility in the timing of capital expenditures and management believes that debt repayment may be re-negotiated,
there is a need to generate extra liquidity in addition to the operational cash flows.
The actions taken by the group so far towards managing this situation are as follows:
Partial sale of the Swiss operations
On 26 March 2013 the board agreed with the Chairman, Mr. Samih Sawiris, that he converts his previously extended loans to the Group into
the equity of the Swiss subsidiary Andermatt Swiss Alps (ASA) reducing the Group share in ASA to 49% and that he becomes respon sible for
the funding of the resort by investing at least CHF 150 million into ASA). This move, not only relieves ODH from further funding needs from
ASA, but also reduces debt and its burden on ODH and significantly improves the debt / equity ratio.
New Loan from Chairman
For 2013, Mr. Samih Sawiris agreed to lend the Group up to CHF 60 million of which CHF 31.8 million were used. In November 2013, Mr.
Samih Sawiris renewed his commitment and agreed to lend the Group up to CHF 60 million until end of December 2014. In March 201 4 this
commitment was replaced by a new commitment, in which Mr. Samih Sawiris agreed to lend the Group up to CHF 115 million until end of
April 2015. Of the superseded commitment signed in November 2013 as well as of its replacemet signed in March 2014 nothing has been
drawn down until the date of this report.
Monetization plan
Management has also prepared a monetization plan in 2012 to sell certain assets and implement other actions to generate cash. This has and
will continue to free up cash to be injected into the business of the group. So far CHF 62.5 million have been realized through this monetization
plan which is in line with what management has expected in the prior period. Management expects to realize an additional CHF 50-70
million from further monetization items.
However, should the action steps under the monetization plan not be sufficient to fund the Group’s operations, then the group intends to
postpone certain planned capital expenditure investments that are discretionary; such postponement of these projects will result in shifting
their related revenues forward to the future until they are completed.
From an operational perspective management is still working on several cost saving initiatives that should generate further savings in
overhead expenses, direct expenses and interest expenses. These initiatives target enhancing the performance of the group in certain
segments where we believe that there is room for enhancement mainly in the hotel segment in Egypt.
Management believes that these plans are sufficient to substantially mitigate the liquidity risk.
Given that there is a certain degree of uncertainty in major countries where the Group operates, namely Egypt and Oman, the loan from our
Chairman as noted above is extended to support the company in the coming few months should such uncertainties prevail. However
management keeps monitoring the events as they unfold in case further immediate action is required.
74,129,324
-
75,653,882
-
149,783,206
-
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR
SALE
27.1 Management’s plans to manage liquidity shortages and related uncertainty
The current cash flows from normal operations are not, on their own, sufficient to finance the current operational costs, the capital
expenditures commitment as well as the other planned but not committed investments in the Group’s destinations in addition to the debt
repayment obligations.
2012
NON-CURRENT ASSETS HELD FOR SALE
Related to Tamweel (ii)
2012
2013
(27,239,062)
-
(52,164,349)
-
(79,403,411)
-
(i) Planned disposal of CMAR
On 5 December 2012, European Investment Bank (EIB) served a letter to a subsidiary of the Group notifying EIB’s intention to sell their
interest in the shares of Club Méditerranée Albion Resort Ltd. (CMAR) based on the Put option and Call option Agreement date d April
2006 between International Holding for Hotels Company (IHH), European Investment Bank (EIB), and Société de Promotion ET De
Participation pour la Cooperation Economique (PROPARCO). Subsequently, on 15 January 2013, IHH served to PROPARCO a
letter notifying IHH’s intention to exercise the Call Option, through which the Group will acquire the residual interests in the share
capital of CMAR.
It is the Group’s intention to sell its investment in CMAR within the next few months to a third party. Therefore, in February 2013, a third
party has been mandated to put the investment on the market and find a suitable buyer. CMAR does not qualify as discontinued
operation as it is neither a separate major line of business nor a geographical area of operations. As the carrying value of the disposal
group was lower than the fair value less costs to sell, no valuation adjustment was recognised in the statement of comprehensive income
for the disposal group on initial reclassification.
The fair value of the investment property at 31 December 2013 has been arrived at on the basis of a valuation report carried out at this
date by Mr. Ramlackhan of Broll Indian Ocean Ltd, an independent valuation specialist not related to the Group. He is an accredited
valuator in Mauritius and has appropriate qualifications and recent experience in the valuation of properties in the relevant locations.
The valuation company has relied on the Discounted Cash Flow (DCF) method to determine the fair value of the investment property.
This valuation method is in conformity with the International Valuation Standards. For the valuation of the investment property in
Mauritius the valuer used cash flow projections based on the rental contracts and the financial budgets approved by the directors,
covering a ten-year period and an average discount rate of 10.52% per annum. The expected rental income based on the rental
contracts was indexed using a historical inflation index provided by Eurostat.
(ii) Planned disposal of Tamweel
In their August 2013 meeting the Board of Directors decided to sell its Tamweel Group companies (“Tamweel”) and management has
engaged a third party as sell side advisor. The sale process has been started in mid September 2013 after all necessary documentation
had been prepared by the sell side advisor.
Tamweel does not qualify as discontinued operation as it is neither a separate major line of business nor a geographical area of
operations.
The non-current assets held for sale and the liabilities associated with non-current assets held for sale were reclassified from the following
categories of assets and liabilities:
CHF
31 December 2013
CMAR
29.3 Conditional capital
The share capital may be increased by a maximum amount of CHF 130,489,699 through the issuance of up to 5,624,556 fully paid
registered shares with a nominal value of CHF 23.20 each
Tamweel
a)
up to the amount of CHF 14,489,699 corresponding to 624,556 fully paid registered shares through the exercise of option rights
granted to the members of the Board and the management, further employees and / or advisors of the Parent Company or its
subsidiaries.
up to the amount of CHF 116,000,000 corresponding to 5,000,000 fully paid registered shares through the exercise of
conversion rights and / or warrants granted in connection with the issuance of newly or already issued bonds or other financial
instruments by the Parent Company or one of its group companies.
-
514,242
70,120,082
-
-
38,650,052
Deferred tax assets
-
273,402
-
14,708,685
70,120,082
54,146,381
Inventories
-
335,510
-
4,806,826
-
4,926,185
29.4 Significant shareholders
-
3,406,013
The following significant shareholders are known to us.
1,486,781
2,614,997
2,522,461
5,417,970
4,009,242
21,507,501
74,129,324
75,653,882
Borrowings
19,548,575
30,641,965
3,854,555
75,964
23,403,130
30,717,929
-
18,323
2,898,088
18,512,150
Current tax liabilities
-
1,208,076
Provisions
-
420,681
937,844
1,287,190
3,835,932
21,446,420
Liabilities associated with assets classified as non -current assets held
for sale
27,239,062
52,164,349
Net assets classified as disposal group
46,890,262
23,489,533
Investment property (i)
Non-current assets
Current assets
Assets classified as non-current assets held for sale
F-60
2013 Annual Report
Borrowings
Current liabilities
b)
The subscription rights of the shareholders shall be excluded. The Board of Directors shall determine the conditions of the option rights, the
issue price, the dividend entitlements as well as the type of contribution.
At 31 December 2013, no option rights, conversion rights or warrants had been granted on that basis.
2013
CHF
%
Number of shares
%
Samih Sawiris (i)
17,914,355
62.76%
17,907,121
62.74%
1,623,250
5.69%
1,542,643
5.40%
Others
9,005,542
31.55%
9,093,383
31.86%
28,543,147
100.00%
28,543,147
100.00%
TOTAL
(i)
The shares of Samih Sawiris are held directly and through his entities Thursday Holding and SOS Holding.
30 RESERVES (NET OF INCOME TAX)
CHF
2013
2012
Share premium (note 30.1)
243,799,019
243,799,019
Treasury shares (note 30.2)
Cash flow hedging reserve (note 30.3)
Investments revaluation reserve (note 30.4)
General reserve (note 30.5)
29 CAPITAL
Number of shares
2012
(8,499,885)
(768,308)
(76,938)
(449,869)
(10,788,090)
(18,529,412)
4,916,868
4,916,868
Foreign currencies translation reserve (note 30.6)
(283,710,189)
(247,327,433)
Reserve from common control transactions (note 30.7)
(121,749,573)
(120,924,463)
(2,114,229)
(10,220,295)
(178,223,017)
(149,503,893)
Equity swap settlement (note 30.8)
TOTAL
29.1 Issued capital
CHF
2013
30.1 Share premium
23.20 CHF
CHF
2013
28,543,147
28,543,147
662,201,010
662,201,010
Par value per share
23.20 CHF
Number of ordinary shares issued and fully paid
Issued capital
2012
29.2 Fully paid ordinary shares
There were no changes to the share capital in the current as well as in the comparative financial year.
2012
243,799,019
243,799,019
Share capital increase (issuance of ordinary shares)
-
-
Share capital increase costs
-
-
243,799,019
243,799,019
30.6 Foreign currencies translation reserve
30.2 Treasury shares
CHF
Acquisition of treasury shares (i)
Distribution of treasury shares (i)
2013
CHF
2012
(768,308)
(2,053,867)
(8,623,400)
-
891,823
1,285,559
(8,499,885)
(768,308)
As of 31 December 2013, the Company owned 150,701 own shares (31 December 2012: 26,249). A total of 150,612 own shares were
received in 2010 (26,171 shares) and 2013 (124,441 shares) as part of the compensation for the sale of the six percent stake in the former
Garranah subsidiaries (note 30.8).
(i)
During October 2013, the Company bought a total of 59,478 own shares as a part of the board member remuneration for 2012. Most
of these shares have been distributed to the board members during the fourth quarter 2013. The valuation difference has been
recognized in retained earnings (note 31)
30.3 Cash flow hedging reserve
CHF
2013
2012
(449,869)
Gain (loss) arising on changes in fair value of hedging instruments entered into for cash
flow hedges
(1,011,945)
-
-
Interest rate swaps
485,398
702,595
Income tax related to gains/losses recognised in other comprehensive income
(112,467)
(140,519)
(76,938)
(449,869)
The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging
instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments that are
recognised and accumulated under the heading of cash flow hedging reserve will be reclassified to profit or loss only when the hedged
transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedged item, consistent with the relevant
accounting policy. As the cash flow hedge is 100% effective at 31 December 2013 the cumulative hedging gain up to that date is recognised
in other comprehensive income (note 42.7).
30.4 Investments revaluation reserve
CHF
2013
2012
(18,529,412)
Loss from sale of financial assets at FVTOCI
11,344,389
Net gain/(loss) arising on revaluation of financial assets at FVTOCI
(35,775,216)
(3,603,067)
17,245,804
(10,788,090)
(18,529,412)
The investments revaluation reserve represents the cumulative gains and (losses) arising on the revaluation of financial assets at fair value
through other comprehensive income (“FVTOCI”).
30.5 General reserve
CHF
Share capital increase (issuance of ordinary shares)
F-62
2013 Annual Report
2013
Exchange differences arising on translating the foreign operations
2013
2012
(247,327,433)
(213,420,597)
(36,382,756)
(33,906,836)
(283,710,189)
(247,327,433)
Exchange differences relating to the translation of the results and net assets of the Group's foreign operations from their functional
currencies to the Group's presentation currency (CHF) are recognized directly in other comprehensive income and accumulated in the
foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation reserve in respect of
translating the results and net assets of foreign operations are reclassified to profit or loss on the disposal of the foreign operation.
In 2013 the Swiss Franc strengthened against both the USD and Egyptian Pound by 2% and 11% respectively. This led to foreign exchange
losses for the period of CHF 36.4 million.
30.7 Reserve from common control transactions
CHF
2013
(120,924,463)
Non-controlling interests’ share in equity of consolidated subsidiaries
(121,217,626)
(825,110)
Reserve from common control transactions
2012
-
-
293,163
(121,749,573)
(120,924,463)
The reserve from common control transactions mainly relates to the restructuring of the group and the set up of a new holding company
during May 2008. This new structure became effective by way of a share exchange between the shareholders of the initial holding company
(OHD) and the new holding company (ODH). Following this acquisition through exchange of equity instruments, ODH became the parent of
OHD with an ownership stake of 98.05%, later increased to 98.16% at 31 December 2008.
Whereas the new holding company (ODH) is ultimately owned and controlled by the same major shareholders, management decided that
this Group reorganisation was for the purpose of capital restructuring and it has been accounted for as a continuation of the financial
statements of the initial holding Group (OHD) in the 2008 consolidated financial statements
Management concluded that the above Group restructure is classified as a transaction under common control since the combining entities
are ultimately controlled by the same parties both before and after the combination and that control is not transitory.
However, since IFRS 3 Business Combinations excludes from its scope business combinations involving entities or businesses un der common
control (common control transactions), IAS 8 requires management to develop and apply an accounting policy that results in info rmation that
is relevant and reliable.
Management used its judgment in developing and applying an accounting policy for common control transactions arising from the Group’s
capital restructuring as follows:
Recognition of the assets acquired and liabilities assumed of the initial holding Group (OHD) at their previous carrying amounts;
Recognition of the difference between purchase consideration and the previous carrying amount of net assets acquired as an adjustment
to equity;
Transaction costs, which were incurred in relation to the issuance of ODH shares, have been recognised as a reduction to the reserve
from common control transaction. Amount included in the consolidated statement of changes in equity.
In 2012 the movement in this reserve was due to the acquisition of the additional 8.8% stake in Royal for Investment.
2012
4,916,868
4,916,868
-
-
4,916,868
4,916,868
On 3 December 2010, the Parent Company borrowed 1,286,353 ODH shares from Mr. Samih Sawiris free of charge under a securities
lending agreement. These shares were intended to be used for the tender offer regarding the buy-out of the remaining shareholders of
Orascom Hotels & Development SAE (OHD), a company listed at the EGX. The borrowed ODH shares were not accounted for as treasury
shares by the Group, as Mr. Samih Sawiris retained the significant rights, such as dividend and voting rights, during the borrowing period as
per contractual provisions. Under the above mentioned securities lending agreement the Parent Company has returned 330 000 of the
borrowed ODH shares to Mr. Samih Sawiris on 28 July 2011 by way of capital increase, which is further explained in note 44. All of the
remaining 956,324 shares, which were not used during the above mentioned tender offer, were returned to Mr. Samih Sawiris by 31
December 2013. The difference between the balance, which was reported in equity as “equity swap settlement”, measured at the fair value of
the share at the end of the tender offer, and the fair value amount of the capital increase was recognised as ”general reserve”.
30.8 Equity swap settlement
CHF
2013
2012
(10,220,295)
(10,220,295)
Acquisition of treasury shares
8,106,066
-
(2,114,229)
(10,220,295)
The consolidated statement of changes in equity includes a balance of CHF (10.2) million outstanding at 31 December 2013 which has
originally arisen from the Group’s sale of the six percent stake in Garranah companies to the Garranah family during 2010. The unsettled
consideration at 31 December 2012 amounted to CHF 10.6 million of which CHF 10.2 million were reported as a negative component in
equity. The remaining balance arising from such sale of CHF 0.4 million was classified as trade and other receivables. On 12 November 2013,
the Garranah family has settled part of the outstanding consideration by transferring 124,441 ODH shares. This led to a corresponding
transfer of CHF 8.1 million from this reserve to treasury shares (note 30.2). The residual amount as at 31 December 2013 is due to EDRs
which are held in an escrow account.
2013 Annual Report
31 RETAINED EARNINGS AND DIVIDENDS ON EQUITY
INSTRUMENTS
CHF
The decrease in non-current borrowings is due to the deemed loss of control of ASA Group, the reclassification of CMAR and Tamweel
as disposal groups as well as the weak EGP against the Swiss Franc. See also notes 28 and 39 for further details.
2012
Restated
2013
227,635,661
Profit/(loss) attributable to owners of the Parent Company
(157,786,634)
(97,271,213)
685,790
(106,410)
Remeasurement gain/(loss) on defined benefit obligation
Loss from sale of financial assets at FVTOCI transferred from revaluation reserve
325,710,287
(11,344,389)
Distribution of treasury shares (note 30.2)
-
(374,489)
58,815,939
(697,003)
227,635,661
During 2012 and 2013 no dividends had been paid. In respect of the current year, the Board of Directors does not propose a dividend or a
capital reduction to the shareholders at the Annual General Meeting.
32 NON-CONTROLLING INTERESTS
In July 2013 current borrowings due to Arab African International Bank of CHF 31.7 million were paid back. The repayments were
financed by selling the investment in NCHR (note 22) and by additional financing from Mr. Samih Sawiris (CHF 10.9 million) as part of his
commitment to finance the Group.
(iii) As part of the capital increases in ASA the existing loans between the Group and Mr. Samih Sawiris of CHF 110 million were fully offset
and the indebtedness of the Group was therefore reduced (for further details refer to note 39).In order to finance working capital
requirements, the Group, as part of its credit arrangements with the Chairman, since then has withdrawn an additional CHF 31.8 million
(note 37).
(iv) In April 2013 El-Gouna Electric Company, an Egyptian subsidiary of ODH, entered into a sale and leaseback agreement with Nile
Finance Company by selling their power plant with a carrying value of EGP 45.8 million (CHF 6.2 million) to the finance company for a
total value of EGP 40 million (CHF 5.4 million) and leasing it back for a period of 80 months for a total lease value of EGP 66.3 million
(CHF 8.9 million). At the end of the lease period El-Gouna Electric Company has the right to acquire the leases power plant for a residual
value of EGP 1,000 (CHF 128). Based on the agreement the lease obligation is recognized at the present value of the minimum lease
payments of CHF 5.4 million whereas the asset is reclassified to assets held under finance lease within property, plant and equipment at its
carrying amount of CHF 6.2 million (refer to note 16).
33.2 Breach of loan agreement
CHF
2013
2012
235,883,784
240,823,907
Share of (loss)/profit for the year
(9,672,987)
(4,146,815)
Exchange differences arising on translation of foreign operations
(12,851,572)
(6,896,360)
5,615,487
6,103,052
218,974,712
235,883,784
Non-controlling interest share in equity of consolidated subsidiaries (i)
(i)
For 2013 the amount represents NCI share in capital increases mainly due to share contributions to Salalah and Sifah (Oman). For 2012
this figure represents NCI share in capital increases mainly due to share contribution to Salalah, Sifah, Soda (Oman), Med Taba (Egypt)
and Qued Chibika Development (Morocco). The increase was smoothened by the purchase of an additional interest in Royal for
Investments (Egypt) as well as the disposal of Lupp Middle East (Oman).
33 BORROWINGS
Current
CHF
2013
2013
2012
Secured - at amortized cost
Credit facilities (i)
163,373,392
210,771,764
-
-
Bank loans (ii)
33,948,552
40,584,879
205,373,333
279,376,296
-
73,127,911
-
-
Shareholder’s loan (iii)
Finance lease
TOTAL
584,495
-
5,293,283
197,906,439
324,484,554
210,666,616
Due to the aforementioned factors and the resulting low cash flow, which fell short of meeting financial obligations, the Group has exerted a
great deal of effort to negotiate with its banks a rescheduling scheme, which aims to reschedule all 2013 due instalments and their
accompanying interest expense. When negotiations started during October 2012, the portion of long term debts (due during 2013) was CHF
58.4 million (hotels & real estate segments representing CHF 50.6 million) while the related interest expense was CHF 30.9 million (hotels
& real estate segments representing CHF 22.4 million).
Due to the long track record the Group has had with its banks and due to the current economic conditions, the Group has succeeded in
negotiating rescheduling its due instalments amounting to CHF 42.3 million. The residual amounts, which were due in 2013, were paid
accordingly in 2013.
It is worth highlighting that to accomplish this rescheduling scheme, the Group was involved in negotiations, which have led to the successful
receipt of formal commitment letters from the relevant banks, in addition to signing the ALA (Amended Loan Agreement) with the new
runoffs which are expected to relieve the burden of the current financial obligations.
Non-current
2012
In light of the political turmoil that has ensued in Egypt post the revolution; the Egyptian economy has been at a virtual standstill throughout
2013 up to date. The tourism sector, the main pillar industry, has been adversely affected, which has led to a decrease in the number of
incoming tourists evidenced by a decline in occupancy rates. Our subsidiary in Egypt, being the main pillar of the Group, has been greatly
affected by the surrounding circumstances and this has had a direct adverse influence, reflected in the declining profitability and cash flow of
the Group.
279,376,296
33.1 Summary of borrowing arrangements
The weighted average contractual effective interest rate for all credit facilities and loans are 7.46% (2012: 7.64%). It is calculated by dividing
the forecasted contractual interest expense due next year by the total outstanding credit facilities and bank loans at the end of the current
reporting period. For a breakdown of debts bearing variable and fixed interest see note 42.10.1.
(i) Credit facilities used by the group are revolving facilities used to finance working capital requirements and they are available in multiple
currencies. The average interest rate for the credit facilities for year 2013 is 8.83% (2012: 8.76%).
(ii) Bank loans are current and non-current loans and have in general variable interest rates including a mark up. Property, plant and
equipment with a carrying amount of CHF 86.7 million (2012: CHF 70.3 million) and receivables with a carrying amount of CHF 12.4
million (2012: CHF 18.7 million) have been pledged to secure borrowings (see notes 16 and 21). The decrease was partly set-off by a new
non-current bank loan for a subsidiary in UAE of CHF 15.3 million.
All such actions undertaken by the Group led to steadily waiving covenants testing by the banks, which in turn enabled the Group to be in
compliance with the financial covenants of the loans and ensured that no breach takes place.
As at 31 December 2013 the Group has obtained financial covenant waiver from all of its banks evidencing no breach of financial covenants.
34 TRADE AND OTHER PAYABLES
CHF
Non-current trade payables
Current trade and other payables
2013
2012
25,708,424
32,139,626
30,124,918
49,984,236
Trade and other payables decreased mainly due to the deemed loss of control of ASA Group (note 39).
F-64
2013 Annual Report
35 OTHER FINANCIAL LIABILITIES
CHF
36 PROVISIONS
2013
2012
11,418,524
10,821,075
-
Current
Non-current
TOTAL
31 December 2012
95,605,112
Non-Current
79,106,988
-
-
95,605,112
79,106,988
1,738,479
Derivatives that are designated and effective as hedging
instruments carried at fair value
Hedging liabilities
31 December 2013
TOTAL
Derivatives linked to unquoted equity instruments
Call option agreement –ADL
CHF
Current
Financial liabilities carried at amortized cost
Put option and call option agreement – CMAR (i)
F-66
CHF
372,931
562,337
11,791,455
13,121,891
11,418,524
-
372,931
13,121,891
11,791,455
13,121,891
Put option and call option agreement - CMAR
(i) Pursuant to the Put option and Call option Agreement dated April 2006 between Orascom Holding for Hotels Company (IHH),
European Investment Bank (EIB), and Société de Promotion ET De Participation pour la Cooperation Economique (PROPARCO). IHH
(a subsidiary) unconditionally and irrevocably undertakes to purchase all or part of EIB and PROPARCO shares in Club Méditerranée
Albion Resort Ltd. (CMAR) during the put period ending 31 March 2016 if EIB and PROPARCO exercise their rights.
In addition, IHH had a right to buy all or part of the shares of EIB and PROPARCO during the call period ending 31 March 2016. A
financial asset “right to buy” and a corresponding financial liability were initially recognised at fair value amounting to CHF 13 million
which is the present value of the amount to be redeemed to the other shareholders if they were to exercise the option on thelast day of the
option period (future value at 2016: CHF 28 million). The difference between the present value and final redemption amount is interest
expense that is recognized in profit or loss over the life of the financial liability using an effective interest rate of 6.75%. This financial
liability was subsequently measured at amortised cost in each subsequent period (details of accounting policy are disclosed in note 3.21 to
the financial statements). The interest expense recognised in the year amounted to CHF 1,125,375 (2012: CHF 1,019,092) (note 11).
Starting 1 January 2007, CMAR has been deemed to be controlled due to the potential voting rights arising from the call option the
Group has over 42.5% of EIB’s and PROPARCO’s interests in CMAR, in addition to the existing voting rights of 12.5%. Therefore,
CMAR was regarded as a subsidiary and consolidated for the first time in 2007 based on the Group’s present ownership interest in
CMAR of 12.5% with the financial asset derecognised.
On 5 December 2012, EIB served to IHH a letter notifying EIB’s intention to exercise the Put Option. Subsequently, on 15 January 2013,
IHH served to PROPARCO a letter notifying IHH’s intention to exercise the Call Option.
As at 31 December 2013 only a letter notifying EIB’s intention to exercise the put option has been received. However, the shares have not
yet been paid. As the Put Option agreement states that the ownership benefits and the voting rights of the put shares are transferable to
IHH only upon payment of the put price, the Group continues to consolidate CMAR with an ownership interest of 12.5%.
As it is the Group’s intention to sell its investment in CMAR to a third party within the next few months, it has been reclassified as disposal
group held for sale in the first quarter of 2013 (refer to note 28 for further details).
Additional provisions
recognized
Reductions arising from
payments
Transfer to liabilities directly
associated with non-current
assets held for sale
Provision for
infrastructure
completion
Provision
for legal
cases
(i)
(ii)
Provision
for
employee
benefits
(iv)
Other
provisions
Total
(v)
20,226,978
18,956,274
4,223,646
6,777,480
28,922,610
79,106,988
-
8,351,837
2,733,370
5,836,110
9,951,582
26,872,899
(2,196,385)
(3,946,004)
(442,597)
(689,567)
(710,164)
-
Derecognized on disposal of
subsidiary
(401,187)
Exchange differences arising
on translation of foreign
operations
(554,895)
Balance at 31 December
2013
Provision
for
government
al fees
(iii)
18,560,732
(928,329)
-
(1,167,720)
25,212,062
(246,970)
-
(736,543)
5,973,503
(111,126)
-
(539,512)
11,962,952
-
(2,339,347)
33,895,863
(401,187)
(5,338,017)
95,605,112
(i) Provision for infrastructure completion relates to committed cash outflows for the development of the necessary infrastructure to make
the project area that is usually located in remote regions, habitable and attractive. Such provisions are recorded for land and real estate
sales on the date on which all the criteria for revenue recognition are met, in case that the cash outflows for related infrastructure costs
have not yet been incurred and take place with the upcoming twelve months.
(ii) Provision for legal cases consists of expected cash outflows for the settlement of pending litigations and relates amongst others to the
Falcon case which is described in note 22.
Further, there are ongoing discussions between the Government of Egypt and one of ODH’s subsidiaries in order to enable this subsidiary
to resume its budget housing activities on land that is currently subject to a dispute. At the current stage, the discussions suggest that the
Government would allow the Group’s subsidiary to develop the land within 10 years from the date of the settlement agreement in
consideration for the payment of the full land price immediately which amounts to CHF 9.4 million (equivalent of EGP 70 million. The
Government is also asking for an additional payment in consideration for the extra time given to the Group’s subsidiary to develop the
land. The current estimate of this additional payment is CHF 6.8 million (equivalent of EGP 50 million), which has been provided for in
2013. Refer to note 48 for further information on the legal case.
(iii) Provision for government fees relates to cash outflows for fees due on the sale of land and / or any profit thereon which were recorded
during the current year. Such provision is calculated and recorded using the locally enacted fee structures. Management expects the
related cash outflow to take place within the upcoming twelve months.
(iv) Provision for employee benefits partly relates to compulsory termination payments to foreign employees in Oman. The provision is based
on their actual salaries. As the work permits for these employees are reconsidered by the Government on annual basis, the related cash
outflows are likely to take place within the upcoming twelve months. In 2013 the main increase is due to end of service benefits which will
have to be paid in 2014 as a result of the cost saving programme of the Group.
(v) This provision mainly includes charges, services and consultancy fees for the Group's current year's operations which have not yet been
finally negotiated as well as provisions in relation to various assets of the Group. In addition it covers the Group’s exposures to tax risks.
Management expects the related cash outflows to take place within the upcoming twelve months.
Management annually reviews and adjusts these provisions based on the latest developments, discussions and agreements with the involved
parties.
2013 Annual Report
37 OTHER CURRENT LIABILITIES
CHF
2013
2012
Advances from customers (i)
80,921,247
185,144,818
Other credit balances (ii)
33,778,041
11,785,375
Accrued expenses (iii)
26,424,453
35,215,893
38.3 Analysis of assets and liabilities over which control was lost
2013
CHF
2012
Sole/OBHI
Tour operations
LUPP
Non-current assets
3,740,470
2,062,198
Deposits from others
7,102,357
7,900,172
Taxes payable (other than income taxes)
7,503,677
9,035,337
Current assets
39,242,834
8,574,896
Inventory
-
-
223,475
844,239
1,680,930
-
441,186
1,804,631
195,816,848
259,337,421
-
Amounts due to shareholders (iv)
Due to management companies
TOTAL
(i) Advances from customers include amounts received (progress payments) from buyers of real estate units between the time of the initial
agreement and contractual completion. The decrease is mainly related to the deemed loss of control of ASA Group and the
reclassification of Tamweel as disposal group.
39,488
-
Other currents assets
85,945
197,166
5,619,032
90,455
20,503
183,472
Due from related parties
(258,298)
(ii) The increase is mainly due to advances made by a third party for hotel accommodation in the upcoming months.
-
(1,970)
-
(18,100)
(25,021)
-
-
(865,068)
-
-
(895,710)
Provisions
-
(iii) Accrued expenses mainly include operating costs for the hotel and destination management activities.
5,591
Current liabilities
(iv) Amounts due to shareholders include amounts owed to non controlling shareholders for planned capital increases in several subsidiaries
in Egypt in the total of CHF 1.7 million (2012: CHF 1.1 million) amounts owed to Mr. Samih Sawiris in the total of 31.8 million (2012: CHF
7.5 million) as well as amounts owed to other shareholders in the total of CHF 3.3 million (2012: nil).
38 DISPOSAL OF A SUBSIDIARY
Current borrowings
(1,011,785)
(61,321)
(1,295,985)
-
68,399
(4,609,896)
2,628,687
(1,076,757)
3,606,699
38.1 Description of transactions
Net assets and non-controlling interests disposed of
(96,839)
(283,389)
2013
In the first three months of 2013 it has been agreed to sell the “Sole”-Project in Romania (“Sole/OBHI”), which mainly consists of plots of land,
to Mr. Samih Sawiris. Therefore it was reclassified as disposal group. As the actual sales price of CHF 2.9 million, which is supported by a
valuation report of an independent valuer, was lower than the carrying amount, an impairment loss of CHF 2.3 million was recognized in other
gains and losses when the investment was reclassified as disposal group (note 10). In October 2013, the sale and purchase agreement was
signed. Sole/OBHI does not qualify as discontinued operation as it is neither a separate major line of business nor a geographical area of
operations.
2012
38.2 Consideration received
Consideration received in cash and cash equivalents
Other consideration received
Total consideration received
CHF
2013
Sole/OBHI
Consideration received
2,935,240
./. Net assets and non-controlling interests disposed of
(2,628,687)
2012
Tour operations
2013
Sole/OBHI
Consideration received in cash and cash equivalents
Less: cash and cash equivalent balances disposed of
LUPP
2,935,240
-
-
-
153,562
6,732,750
2,935,240
153,562
6,732,750
LUPP
153,562
1,076,757
1,230,319
6,732,750
(3,606,699)
3,126,051
38.5 Net cash outflow on disposal of subsidiaries
CHF
2013
Sole/OBHI
2012
Tour operations
306,553
Gain on disposal
On 1 November 2012 OHD, a subsidiary of the Group, entered into shares sale and purchase agreements with Garranah family. Besides
reducing the ownership in several investments in associates, the Group is also selling their remaining subsidiary operating in the tour
operations business. Therefore the segment “tour operations” is considered a discontinued operation and is presented accordingly. For
further details refer to note 14.
CHF
38.4 Gain on disposal of subsidiaries
Total net cash outflow
2012
LUPP
Tour operations
2,935,240
-
-
(90,455)
(20,503)
(183,472)
2,844,785
(20,503)
(183,472)
39 DEEMED LOSS OF CONTROL OF SUBSIDIARY
39.1 Description of transactions
39.1.1 Deemed loss of control of ASA and its subsidiaries
On 26 March 2013, the Board of Directors of ODH and Mr. Samih Sawiris agreed to improve the capitalization of its Swiss subsidiary
Andermatt Swiss Alps (ASA).
On 25 June 2013, as a result of the agreement mentioned above, the share capital of ASA was increased through the following steps:
CHF 71.262 million (71,262 shares at nominal value CHF 1,000) through debt equity swap of the loans due to ODH
CHF 110.441 million (110,441 shares at nominal value of CHF 1,000) through debt equity swap of the loans due to Mr. Samih Sawiris
CHF 7.444 million (7,444 shares at nominal value of CHF 1,000) as cash contribution from Mr. Samih Sawiris
F-68
2013 Annual Report
As a consequence of the transaction existing loans between the Group and Mr. Samih Sawiris were fully offset and the indebtedness of the
Group was therefore reduced. The transaction has improved the debt-to-equity ratio of the Group and will reduce interest expense in the
future. Furthermore, Mr. Samih Sawiris will invest at least CHF 150 million of new equity or subordinated loans into ASA in order to secure
funding of the resort Andermatt until 2017. Since the transaction Mr. Samih Sawiris has already injected another CHF 46 million of cash into
ASA.
As a result of the various capital increases, Mr. Samih Sawiris has become the new majority shareholder of ASA with a 51% share by
converting his loans to the Group into ASA equity, and acts as new Executive Chairman of ASA. The Group has lost control over ASA during
this transaction. As at 30 June 2013 the Group has a remaining share of interest of 49% in ASA. Therefore the investment was
deconsolidated in June 2013 and is now classified as an investment in associates (for further details refer to note 20).
As ASA and its subsidiaries represent the entire Swiss operations of the Group, which is considered a major geographical area of operations
of the Group, the sold operations are recognized as discontinued operations and are presented accordingly. For further details refer to note
14.
In September and November 2012, Andermatt-Sedrun Sports AG (“ASS”), a subsidiary of ODH, has acquired two companies operating
skiing areas. The acquisitions were financed through capital increases in ASS. As Andermatt Swiss Alps AG (“ASA”), a former subsidiary of
ODH and the sole shareholder in ASS before the capital increases, did not fully participate in all capital increases, ASA has lost control over
ASS during this transaction. As at 31 December 2012 the Group had a remaining share of interest of 40.26% in ASS, therefore the
investment was classified as an investment in associates. In 2013, ODH first regained control over ASS however ASS was subsequently
derecognized in the consolidated financial statements of the Group as a result of the deconsolidation of ASA (for further details refer to note
20).
39.2 Analysis of assets and liabilities over which control was lost
ASA
Consideration paid in cash
-
Consideration paid non-cash (converted shares and loans)
Deconsolidated net assets
ASS
-
108,140,486
5,600,000
6,004,857
(1,752,483)
Cost value of investment in associates
108,140,486
Fair value of investment in associates
108,362,030
7,859,633
221,544
(1,992,741)
Gain/(loss) from deemed loss of control
9,852,374
The loss from deemed loss of control is recognised in the statement of comprehensive income within “discontinued operations” (see note 14).
CHF
Consideration paid in cash and cash equivalents
Less: cash and cash equivalent balances disposed of
Total net cash outflow
ASS
ASA
-
(5,600,000)
(7,610,213)
(472,877)
(7,610,213)
(6,072,877)
40 RETIREMENT BENEFIT PLANS
ASA
ASS
40.1 Defined contribution plans
Non-current assets
CHF
39.4 Net cash outflow from deemed loss of control
39.1.2 Deemed loss of control of ASS and its subsidiaries
CHF
39.3 Gain/(Loss) from deemed loss of control
203,630,390
1,731,778
12,984,634
-
2,087,100
-
Deferred tax assets
5,061,272
-
149,300
750,508
Employees of specific subsidiaries in the Group (such as Eco-Bos Development Ltd (UK), Oued Chbika Development SA (Morocco),
Orascom International Hotel and Development (France) and Luštica Development a.d. (Montenegro)) are members of private or statemanaged retirement benefit plans operated by insurance companies or the relevant Jurisdictions’ Social Insurance Authorities. The
subsidiaries are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits.
Qualifying employees of these subsidiaries are also required to contribute to such schemes at a different percentage deducted from their
salaries.
Inventories
160,111,841
-
Benefits are payable to qualifying employees, by the relevant insurance companies and authorities, on attainment of a retirement age
specified in the plans. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.
4,615,887
27,537
13,072,860
-
7,610,213
472,877
Investment in associates
Current assets
The total expense recognised in the consolidated statement of comprehensive income of CHF 841,585 (2012: CHF 757,103) represents
contributions payable to these plans by the Group at rates specified in the rules of the plans. At 31 December 2013, contributions of CHF
144,011 are due in respect of the 2013 reporting period had not been paid over to the plans (2012: contributions of CHF 149,055 were due in
respect of 2012 reporting period). The amounts were paid subsequent to the end of the reporting period.
Borrowings
Retirement benefit obligation
(17,386,046)
-
(100,000)
-
(1,253,199)
-
40.2 Defined benefit plans
The Group operates fund defined benefit plans for qualifying employees in Switzerland. Under the plans, the employees are entitled to
retirement benefits and risk insurance for death and disability. No other post-retirement benefits are provided to these employees. The most
recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out on 31 December 2013.
Current liabilities
Current borrowings due to future shareholders (used for capital increase in ASA)
Provisions
Net assets disposed of
(110,441,000)
-
(18,266,812)
(2,607)
(7,117,374)
(3,820,118)
(648,156)
-
(145,970,424)
108,140,486
(912,458)
(1,752,483)
Swiss pension plans need to be administered by a separate pension fund that is legally separated from the entity. The law prescribes certain
minimum benefits.
The pension plans of the employees of the Swiss entities are carried out by collective funds with Allianz Suisse LebensversicherungsGesellschaft. Under the pension plans, the employees are entitled to retirement benefits and risk insurance for death and disability. The
boards of the various pension funds are composed of an equal number of representatives from both employers and employees.
Due to the requirements of IAS 19 the above mentioned pension plans are classified as defined benefit plans. The pension plans are described
in detail in the corresponding statues and regulations. The contributions of employers and employees in general are defined in percentages of
the insured salary. The retirement pension is calculated based on the old-age credit balance on retirement multiplied by the fixed conversion
rate. The employee has the option to withdraw the capital at once. The death and disability pensions are defined as percentage of the insured
salary. The assets are invested directly with the corresponding pension funds.
The pension funds can change their financing system (contributions and future payments) at any time. Also, when there is a deficit which
cannot be eliminated through other measures, the pension funds can oblige the entity to pay a restructuring contribution. For the pension
F-70
funds of the Group such a deficit currently cannot occur as the plans are fully reinsured. However, the pension funds could cancel the
contracts and the entities of the Group would have to join another pension fund.
In the current and comparative period no plan amendments, curtailments or settlements occurred. However, along with the deemed loss of
control of subsidiaries (for further details refer to note 39) the respective defined benefit obligations have been derecognised.
Movements in the present value of the plan assets in the current period were as follows:
CHF
2012
Restated
2013
Opening fair value of plan assets
7,089,648
The fully reinsured pension funds have concluded insurance contracts to cover the insurance and investment risk. The board of each pension
fund is responsible for the investment of assets and the investment strategies are defined in a way that the benefits can be paid out on due date.
Derecognised assets due to deemed loss of control of subsidiaries (note 39)
(3,399,593)
Interest income on plan assets
63,410
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out on 31 December
2013. The present value of the defined benefit obligation, and the related current service cost and past service cost, were me asured using the
Projected Unit Credit Method.
Return on plan assets excluding interest income
(8,399)
Amounts recognised in profit or loss in respect of these defined benefit plans are as follows:
Benefits (paid)/deposited
CHF
1,290,000
Net interest expense
29,825
228,414
2,521
4,822
796,785
1,523,236
Expense recognised in profit or loss
Contributions from plan participants
2012
Restated
2013
Remeasurement (gain)/loss on defined benefit obligation
(694,189)
Return on plan assets excl. interest income
8,399
Expense recognised in other comprehensive income
(685,790)
69,389
(6,699)
62,690
The amount included in the consolidated statement of financial position arising from the Group’s obligation in respect of its defined benefit
plans is as follows:
31 December
2013
31 December
2012
Restated
174,339
6,699
484,809
830,189
484,809
830,193
(2,008,718)
2,705,966
(2,371,368)
7,089,648
The actual return on plan assets was CHF 55,011 (2012: CHF 181,038).
The principal assumptions used for the purposes of the actuarial valuations were as follows:
2013
Discount rates
Amounts recognised in other comprehensive income in respect of these defined benefit plans are as follows:
CHF
7,619,596
The respective insurance company is providing reinsurance of these assets and bears all market risk on these assets.
764,439
Administration cost excl. cost for managing plan assets
Contributions from the employer
Closing fair value of plan assets
2012
Restated
2013
Current service cost
CHF
F-72
2013 Annual Report
1 January 2012
Restated
2012
2.10%
2.00%
Expected rates of salary increase
1.00%
1.00%
Expected pension increases
0.00%
0.00%
The following sensitivity analyses - based on the principal assumptions - have been determined based on reasonably possible changes to the
assumptions occurring at the end of the reporting period:
If the discount rate would be 25 basis points (0.25 percent) higher (lower), the defined benefit obligation would decrease by CHF 3.5 million
(increase by CHF 3.8 million if all other assumptions were held constant
If the expected salary growth would increase (decrease) by 0.25%, the defined benefit obligation would increase by CHF 3.7 million
(decrease by CHF 3.7 million if all other assumptions were held constant
If the life expectancy would increase (decrease) with one year for both men and women, the defined benefit obligation would increase by CHF
3.7 million (decrease by CHF 3.6 million if all other assumptions were held constant
Present value of funded defined benefit obligation
3,683,606
9,694,301
9,642,851
The average duration of the defined benefit obligation at the end of the reporting period is 17.3 years (2012: 18.1 years)
Fair value of plan assets
(2,705,966)
(7,089,648)
(7,619,596)
The Group expects to make a contribution of CHF 374,565 to the defined benefit plans during the next financial year (2012: CHF913,442).
Net liability arising from defined benefit obligation
977,640
2,604,653
2,023,255
41 RISK ASSESSMENT DISCLOSURE REQUIRED BY SWISS LAW
Movements in the present value of the defined benefit obligation in the current year were as follows:
CHF
Opening defined benefit obligation
Derecognised obligation due to deemed loss of control of subsidiaries (note 39)
Current service cost
Interest expense on defined benefit obligation
Contributions from plan participants
Benefits (paid)/deposited
Remeasurement (gain)/loss on defined benefit obligation
Administration cost (excluding cost for managing plan assets)
Closing defined benefit obligation
2012
Restated
2013
9,694,301
(4,652,792)
9,642,851
-
764,439
1,290,000
93,235
228,414
484,809
830,193
(2,008,718)
(694,189)
(2,371,368)
69,389
2,521
4,822
3,683,606
9,694,301
Organizational and process measures have been designed to identify and mitigate risks throughout the Group at an early stage. The
responsibility for risk assessment and management is primarily allocated to the segments and entities. However, Group Finance has
implemented monitoring and consolidating measures. The Group’s entities report to the Group Finance on their current operations and
financial situation regularly. Various reports and analysis have been implemented to allow the Group to monitor the operations closely and
immediately identify risks and initiate mitigating actions. In addition, the Group Finance has established during 2008 a new function for risk
assessment and internal control. A risk matrix has been created that was populated by the most significant entities of the Group. The Group
has centralized certain functions (e.g. treasury, asset management, information technology and human resources) to be able to identify and
control risks more closely. The Group initiated a plan to centralize the legal and internal audit functions in order to mitigate the risks in an
effective and efficient way.
Group Finance assesses and consolidates all information from the entities and shares and discusses it with the Group Management on a
regular basis. A more formal reporting on risks over financial reporting was made prior to year-end to the Board of Directors. The Board of
Directors in turn has performed a risk assessment covering longer-term operational and strategic risks to the Group. The conclusions of such
risk assessments have also been considered by Group Finance. As the Group CFO is consistently and closely involved in the risk assessment
process and the preparation of the consolidated financial statements it is ensured that all conclusions from the Group-wide risk assessment
are adequately considered in the consolidated financial statements.
2013 Annual Report
42 FINANCIAL INSTRUMENTS
42.4 Financial risk management objectives
42.1 Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to
stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged since 2010.
The capital structure of the Group consists of net debt (borrowings, as detailed in note33, offset by cash and bank balances) and equity of the
Group (comprising issued capital, share premium, reserves, retained earnings and non-controlling interests as detailed in notes 29 to 32).
The Group is not subject to any externally imposed capital requirements.
According to the Group’s internal policies and procedures, the Executive Management reviews the capital structure on a regular basis. As
part of this review, the committee considers the cost of capital and the risks associated with each class of capital. The Group has a target
gearing ratio of 40% to 45% determined as the proportion of net debt to equity.
The gearing ratio at 31 December 2013 of 48.49% (see below) decreased significantly mainly due to the deemed loss of control of ASA (see
note 39 for further details) however was still outside the target recommended by the committee because the decrease was partially offset by
the losses for the period.
The gearing ratio at the end of the reporting period was as follows:
CHF
Debt (i)
2013
2012
Restated
408,573,055
603,860,850
(73,310,785)
(101,668,196)
Net debt
335,262,270
502,192,654
Equity (ii)
691,388,849
976,216,562
48.49%
51.44%
Net debt to equity ratio
(i) Debt is defined as long- and short-term borrowings (excluding derivatives), as detailed in (note 33).
(ii) Equity includes all capital and reserves of the Group and non- controlling interests that are managed as capital excluding equity of
disposal groups.
42.2 Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the
basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are
disclosed in note 3.19 Financial instruments.
42.3 Categories of financial instruments
CHF
2013
2012
73,310,785
101,668,196
463
291,121
25,826,471
54,319,056
136,642,178
246,852,041
Financial assets
Fair value through profit or loss ( FVTPL)
Held for trading non-derivative financial assets
Fair value through other comprehensive income (FVTOCI)
Financial assets measured at amortised cost (i)
Financial liabilities
Derivative instrument in designated hedge accounting relationship
At amortised cost (ii)
In the course of its business, the Group is exposed to a number of financial risks. This note presents the Group’s objectives, policies and
processes for managing its financial risk and capital.
The Group’s Corporate Treasury function provides services to the business, co-ordinates access to domestic and international financial
markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyse
exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk),
credit risk and liquidity risk. Other price risk includes equity price risk, settlement risk and commodity price risk.
It is, and has been throughout 2013 and 2012, the Group’s policy not to use derivatives without an underlying operational transaction or for
trading (i.e. speculative) purposes.
The Group seeks to minimise the effects of these risks mainly through operational and finance activities and, on occasional basis, using
derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s internal policies and
procedures approved by the Board of Directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the
use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. The Group does not enter into or
trade financial instruments, including derivative financial instruments, for speculative purposes.
The Corporate Treasury function reports monthly to the Executive Management. The Group Treasury Director carries out risk management
under the Group’s guidelines.
42.5 Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see 42.6 below) and interest
rates (see 42.7 below).
Driven by the need, the Group’s policy is to enter into a variety of derivative financial instruments to manage its exposure to foreign currency
risk and interest rate risk, including:
forward foreign exchange contracts to hedge the exchange rate risk arising on sales in foreign currency to the tourism / real estate
industry;
interest rate swaps to mitigate the risk of rising interest rates
42.6 Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. The
currencies, in which these transactions primarily are denominated, are US Dollar (USD), Euro (EUR) and Egyptian Pound (EGP). Exchange
rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
The Group’s main foreign exchange risk arises from sales in foreign currency to the tourism / real estate industry, which generates a net
foreign currency surplus for the Group. The Group has strong inflows in foreign currency, mainly US Dollar, Euro, Oman Rial and Egyptian
Pound.
Out of the total receivables on hand at the end of the reporting period, receivables in USD have accounted for 35% (2012: 32%), in EUR for
7% (2012: 7%),in EGP for 33% (2012: 46%), in OMR 25% (2012: 0%) and in CHF for 0% (2012: 13%) respectively.
To mitigate the above risk exposures, where possible, the Group borrows in matching currencies to create a natural hedge. The following
table shows the carrying amounts of borrowings, at the end of the reporting period, in the major currencies in which they are issued.
Borrowing
CHF
2013
2012
USD
184,329,115
45%
215,885,556
36%
372,931
562,337
EGP
109,585,004
27%
212,183,963
35%
609,972,848
1,008,615,520
EUR
60,977,623
15%
68,706,387
11%
14,226,606
2%
OMR
34,196,498
8%
Includes trade and other receivables, finance lease receivables as well as those other current assets that meet the definition of a financial
asset. A total of CHF 27.0 million of other current assets does not meet the definition of a financial asset.
AED
15,280,021
4%
5,540,243
1%
CHF
-
-
82,594,428
14%
(ii) Includes trade and other payables, borrowings, notes other financial liabilities as well as other current liabilities that meet the definition of
a financial liability. A total of CHF 80.9 million of other current liabilities does not meet the definition of a financial liability.
JOD
4,204,794
1%
4,723,667
1%
408,573,055
100%
603,860,850
100%
(i)
Total
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2013 Annual Report
At the end of the reporting period, the carrying amounts of the Group’s major foreign currency denominated monetary assets (mainly
receivables and finance lease receivables) and monetary liabilities (mainly borrowings), at which the Group is exposed to currency rate risk,
are as follows:
CHF
Liabilities
2013
Assets
2012
2013
2012
Currency-USD
184,329,115
215,885,569
26,654,271
60,683,312
Currency-EUR
60,977,623
68,706,387
6,154,662
13,680,237
Currency-EGP
103,707,229
212,183,963
27,973,883
86,127,603
Residual foreign exchange exposure is managed by hedging through entering into foreign currency forward contracts.
As discussed above, the Group is mainly exposed to the US Dollar (USD), Euro (EUR) and Egyptian Pound (EGP) arising from sales in these
currencies to the tourism / real estate industry.
The following table details the Group’s sensitivity to a 5% increase and decrease in CHF against the relevant foreign currencies. The (5%) is
the sensitivity rate used when reporting foreign currency risk internally to key management and represents management’s assessment of the
reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates.
The sensitivity analysis includes outstanding borrowings, impact of the changes in the fair value of derivative instruments designated as cash
flow hedges and receivables in foreign currencies and, where appropriate, loans to foreign operations within the Group where the
denomination of the loan is in a currency other than the functional currency of the lender or the borrower.
A positive number below indicates an increase in profit or equity where the CHF strengths 5% against the relevant currency. For a 5%
weakening of the CHF against the relevant currency, there would be a comparable impact on the profit or equity, and the balances below
would be negative.
Profit or loss
Equity
The following table details the notional principal amount and remaining terms of the interest rate swap contract outstanding at the end of the
reporting period:
Last instalment date
Average contracted
Notional principal amount
Fair value assets (liabilities)
Fixed interest rate
CHF
CHF
2013
3.50%
2012
3.50%
2013
34,012,686
2012
34,856,237
2013
(372,931)
2012
(562,337)
The interest rate swap settles on a half-yearly basis. The floating rate on the interest rate swaps is based on LIBOR for 6 months. The Group
settles the difference between the fixed and floating interest rate on a net basis.
42.7.1 Interest rate sensitivity analysis
42.6.1 Foreign currency sensitivity analysis
Currency USD Impact
Management has assessed that the cash flow hedge is 100% effective and therefore the entire change in fair value of the interest rate swap is
recognised in other comprehensive income and accumulated in equity (note 30.3).
30-Jun-14
Currency risk has also recently developed due to the Group’s investments in different markets such as those in Egypt, UAE, Oman, Jordan,
Morocco, Switzerland and the UK. Again, the Group borrows in the local currency of the investment and uses the above mentioned
strategies to mitigate residual currency risk.
CHF
The Group receives the fair value of the swap from the counterparty bank at the end of each reporting period and is disclosed below. The
average interest rate is based on the outstanding balances at the end of the reporting period.
Currency EUR Impact
Currency EGP Impact
2013
2012
2013
2012
2013
2012
7,883,742
7,760,113
2,741,148
2,752,375
3,786,667
6,301,744
55,023
55,887
-
-
The Group's sensitivity to foreign currency has changed in accordance with the changes in EGP, USD and AED borrowings.
Forward foreign exchange contracts
It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency receipts within 25% to 30%
of the exposure generated. At 31 December 2013, the Group has no outstanding forward foreign currency exchange contracts. During the
Group
into any forward foreign currency exchange contracts to hedge part of the Group’s
the current year
receivables denominated in EUR and USD.
During 2013, no ineffectiveness has been recognised in profit or loss arising from the Group’s hedging activities.
42.7 Interest rate risk management
The Group is exposed to interest rate risk because entities in the Group borrow funds at both fixed and floating interest rates. The risk is
managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate swap
contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most costeffective hedging strategies are applied. The Group's exposures to interest rates on financial assets and financial liabilities are detailed in the
liquidity risk management section of this note.
At 31 December 2013, the Group held one interest rate swap contract (IRS) under which the Group agrees to exchange the difference
between fixed and floating rate interest amounts calculated on the agreed notional principal amount. The notional amount of the IRS contract
is based on the outstanding amount of one of the long-term borrowings. The group was engaged in this contract on September 2008 and it
will expire on June 2014.
As the interest rate swap exchanges floating rate interest amounts for fixed rate interest amounts it is designated as a cash flow hedge in order
to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. The interest rate swap and the interest
payments on the borrowing occur simultaneously and the amount accumulated in equity is reclassified in profit or loss over the period that the
floating rate interest payments on debt affect profit or loss.
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative
instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding
at the end of reporting period was outstanding for the whole year. A ‘100 basis point’ (1%) increase or decrease is used when reporting
interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in
interest rates.
If interest rates had been 100 basis points higher / lower and all other variables were held constant, the Group’s profit for the year ended 31
December 2013 would decrease / increase by CHF 2.1 million (2012: decrease / increase by CHF 2.5 million). This is mainly attributable to
the Group’s exposure to interest rates on its variable rate borrowings.
42.8 Other price risks
The Group is exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than trading
purposes. The Group does not actively trade these investments.
42.9 Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group
credit risk arises from transactions with counterparties, mainly individual customers and corporations. The Group has adopted a policy of only
dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial
loss from defaults.
The Group’s exposure to credit risk is, to a great extent, influenced by the individual characteristics of each customer. Risk control assesses
the credit quality of the customer, taking into account its financial position, past experience, other publicly available financial information, its
own trading records and other factors, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s
exposure is continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.
Trade receivables consist of a large number of customers, spread across various industries and geographical areas. The Group does not have
any significant credit risk exposure to any single counterparty or any Group of counterparties having similar characteristics. The Group
defines counterparties as having similar characteristics if they are related entities. The credit risk on sales of real estate is limited because the
Group controls this risk through the property itself by registering the unit in the name of the customer only after receiving the entire amount
due from the customer.
Counterparty risk is also minimized by ensuring that 80% of derivative financial instruments, money market investments and cur rent account
deposits are placed with financial institutions whose credit standings are above Aa1 and 20% above BB+.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group’s
maximum exposure to credit risk without taking account of the value of any collateral obtained.
42.10 Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk
management framework for the management of the Group’s short-, medium- and long-term funding and liquidity management requirements.
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Regarding management’s plans
to manage liquidity shortages and related uncertainty please refer to note 27.1.
As of 31 December 2013, total un-drawn facilities, that the Group has at its disposal in order to further reduce liquidity risk, are CHF 13.0
million (31 December 2012: CHF 23.7 million).
Further, please refer to note 27.1 regarding the disclosures on management’s plans to manage liquidity shortages and related uncertainties.
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2013 Annual Report
42.10.1 Liquidity and interest risk tables
42.12 Fair value measurement
The following tables detail the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment
periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
Group can be required to pay. The tables include both interest and principal cash flows. To the extent that interest cash flow s are floating rate,
the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the
earliest date on which the Group may be required to pay.
42.12.1 Fair value of financial instruments carried at amortised cost
Maturities of non-derivative financial liabilities
Weighted
average
effective
interest
rate
2013
CHF
Non-interest bearing
Variable interest rate
instruments
Fixed interest rate
instruments
CHF
Variable interest rate
instruments
Fixed interest rate
instruments
Less than 6
month
6 months to
one year
1 – 5 years
5 + years
Borrowings/bank loans
Total
31 December 2012
Fair value
Carrying amount
Fair value
408,573,055
518,377,273
603,860,850
633,002,158
42.12.2 Valuation techniques and assumptions applied for the purposes of measuring fair value
28,989,855
-
185,609,210
6.74%
38,417,516
162,157,696
189,503,357
8,118,694
398,197,263
9.40%
13,593,175
42,698,531
70,579,108
36,478,119
163,348,933
208,630,046
204,856,227
289,072,320
44,596,813
747,155,406
Non-interest bearing
Carrying amount
Financial liabilities
-
Weighted
average
effective
interest
rate
2012
31 December 2013
CHF
156,619,355
TOTAL
Except as detailed in the following table, management considers that the carrying amounts of financial assets and financial liabilities
recognised in the consolidated financial statements approximate their fair values.
Less than 6
month
6 months to
one year
1 – 5 years
5 + years
The fair values of financial assets and financial liabilities are determined as follows:
The fair values of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to
quoted market prices (includes unlisted and listed equity investments classified as at FVTPL and FVTOCI respectively).
The Group receives the fair values of foreign currency forward contracts and interest rate swaps from the counterparty banks. Foreign
currency forward contracts are usually measured using quoted forward exchange rates and yield curves derived from quoted interest
rates matching maturities of the contracts. Interest rate swaps are usually measured at the present value of future cash flows estimated
and discounted based on the applicable yield curves derived from quoted interest rates.
The fair values of other financial assets and financial liabilities (excluding those described above) are determined in accordance with
generally accepted pricing models based on discounted cash flow analysis. Specifically, significant assumptions used in determining the
fair value of the following financial assets and liabilities are set out below.
Total
457,843,181
-
5,986,046
-
463,829,227
5.62%
21,221,935
170,911,581
201,639,484
55,467,342
449,240,342
9.96%
14,814,897
84,851,916
54,527,135
23,581,821
177,775,769
493,880,013
255,763,497
262,152,665
79,049,163
1,090,845,338
As at 31 December 2012,the fair value of finance lease receivables was estimated to be CHF 22.1 million using a 16% discount rate based on
an average six year tenor and adding a credit margin that reflects the secured nature of the receivables. As at 31 December 2013 no such
receivables exist anymore as they were reclassified as part of a disposal group (note 28).
42.12.3 Fair value measurements recognised in the consolidated statement of financial position
TOTAL
The following table provides an analysis of financial and non-financial instruments that are measured subsequent to initial recognition at fair
value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
CHF
2013
Credit limit
2012
Counterparty
Rating
Carrying amount
Credit limit
Bank 1
B3
25,721,504
23,004,496
31,801,755
31,700,580
Bank 2
Aa3
12,822,000
12,441,250
14,345,000
11,580,424
Bank 3
-
33,547,458
39,569,956
34,896,433
38,901,674
Bank 4
Aa3
22,270,211
21,143,712
22,822,536
19,455,389
Bank 5
B3
12,113,585
12,108,269
12,715,265
12,667,986
Level 2: fair value measurements are those derived from inputs, other than quoted prices included within Level 1, that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Carrying amount
*
*
Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
2013
CHF
Non-derivative financial assets held for trading
The average interest rate for credit facilities is 8.59% (2012: 8.76%).
Listed and unlisted shares measured at FV
42.11 Impairment losses on financial assets
Derivative financial liabilities designated in a
effective hedge relationship
TOTAL
Level 3
Total
463
-
-
463
463
-
-
463
6,847,143
-
18,979,328
25,826,471
6,847,143
-
18,979,328
25,826,471
-
372,931
-
372,931
-
372,931
-
372,931
9,986,618
9,986,618
9,986,618
9,986,618
Financial assets at FVTOCI
The amounts included above for variable interest rate instruments for liabilities is subject to change if changes in variable interest rates differ
to those estimates of interest rates determined at the end of the reporting period.
Impairment loss on trade receivables
Level 2
Financial assets at FVTPL
* Outstanding amount includes interest charged
CHF
Level 1
2013
2012
1,008,962
20,739,967
1,008,962
20,739,967
Other assets at fair value
Investment property 1)
F-78
2013 Annual Report
44 RELATED PARTY TRANSACTIONS
2012 (restated)
CHF
Level 1
Level 2
Level 3
Total
A party (a company or individual) is related to an entity if:
Financial assets at FVTPL
Non-derivative financial assets held for trading
291,121
-
-
291,121
291,121
-
-
291,121
Financial assets at FVTOCI
Listed and unlisted shares measured at FV
34,563,130
-
19,755,926
54,319,056
34,563,130
-
19,755,926
54,319,056
-
562,337
-
562,337
-
562,337
-
562,337
Derivative financial liabilities designated in a
effective hedge relationship
Investment property
78,903,321
78,903,321
78,903,321
78,903,321
Total gains or( losses) recognized in other comprehensive income
Purchases
Disposals
Derecognized on loss of control of subsidiaries
Transferred to investments in associates (see note 22-iv)
Closing balance
the party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is related party of the entity.
Balances and transactions between the Group and its subsidiaries, which are related parties of the Group, have been eliminated on
consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.
The following balances were outstanding at the end of the reporting period:
Reconciliation of Level 3 fair value measurements of financial assets
Opening balance
e) the party is an entity that is controlled, jointly controlled or significantly influenced by, or which significant voting power in such entity
resides with, directly or indirectly, any individual referred to in (d) or (e); or
During the year, the Group purchased services from companies in which members of the Board have a partnership or significant influence
through ownership during the reporting period. These services related to the leasing of office space (see note 12).
The reconciliation for investment property is shown in note 17.
CHF
c) c) the party is a member of the key management personnel of the entity or its parent;
f)
There were no transfers between Level 1 and 2 in the period. The financial assets at FVTOCI were measured at fair value based on a method
that combined the earning and net equity book values of the companies.
1)
b) the party is an associate of the entity or a joint venture in which the entity is a venture (both defined in IAS 28 Investments in Associates
and Joint Ventures);
d) the party is a close member family of any individual referred to in (a) or (d);
Other assets at fair value
1)
a) directly, or indirectly through one or more intermediaries, the party:
i. controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);
ii. has an interest in the entity that gives it significant influence over the entity; or
iii. has joint control over the entity;
Due from related parties
Unquoted equity
securities
2013
CHF
2012
19,755,926
(429,848)
-
18,979,328
Three Corners Company
(535,726)
2013
2012
El Gouna Football Club
8,189,018
7,479,863
3,460,268
4,583,355
-
-
-
13,286,192
10,055,238
Falcon for Hotels
168,300
(173,300)
2012
Financial instruments
20,833,360
(173,450)
2013
-
-
-
Kingdom Co.
1,379,691
1,376,136
-
-
-
Camps and lodges
1,121,398
1,145,363
-
-
46,394
2,140,680
(710,008)
19,755,926
Iskan International Projects
Andermatt Swiss Alps AG
Besix Group SA
42.13 Derivatives
Other (balances less than CHF 120 000 each)
-
-
831,990
-
-
-
-
3,871,000
718,704
836,273
10,670
1,062,775
Non controlling shareholders
The financial statements include interest rate swaps which are measured at fair value (note 35). Fair value is determined by the counterparty
(financial institution) at mark to market.
Tarot Tours Garanah
Management considers that the carrying amounts of financial liabilities recorded at amortised cost in the financial statements approximate
their fair values
29,009
12,601
1,842,043
2,092,946
548,865
648,774
-
-
Tarot Garranah for touristic transportation
79,548
88,996
-
-
Tarot & Merotil Garranah for hotels
161,979
181,219
-
-
-
-
-
-
Orascom for Touristic Establishments company
(OTEC)
1,025,651
1,148,366
TU Berline University
355,288
Mirotel For Floating Hotels
Close family members
43 SHARE-BASED PAYMENTS
At 31 December 2013 and unchanged to prior year, the Group did not have any share option or participation schemes in place and had not
granted any ODH shares to the members of the Board or the Executive Management.
The Group compensates the members of the Board with a fixed fee of CHF 1,015,227 (note 12.1) which is payable in unrestricted shares of the
Parent Company based on the quoted market price at grant date. The amount has been recognized in the consolidated statement of
comprehensive income as part of administrative expenses. It will be transferred to the members of the Board in 2014.
Samih Sawiris – (i)
Close family companies
Total
Current
Non-current
Total
-
17,115,813
19,641,626
15,970,895
17,081,959
17,115,813
17,500,946
15,970,895
17,081,959
2,140,680
-
-
19,641,626
17,081,959
(i) Current accounts due to Mr. Samih Sawiris are disclosed in note 37. Transactions involving Mr. Samih Sawiris, Chairman, CEO and major
shareholder:
F-80
2013 Annual Report
Acquisition of majority share in Andermatt Swiss Alps and its subsidiaries
45 NON-CASH TRANSACTIONS
For further details on this transaction please refer to note 39.
Purchase of shares from OHD
On 17 January 2007 OHD allocated to employees and the management team (including the chairman and the executive board members) an
amount of 2 million shares for full consideration being the market price as of that day. Mr. Samih Sawiris acquired under this transaction
330,000 shares at the market price. Amounts due from Mr. Samih Sawiris under this transaction are included in “Other assets” as amounts
due from employees and management team and amounted to CHF0.4 million at 31 December 2013 (31 December 2012: CHF 0.4 million).
Amounts due from executive board members under this transaction are included in “Other assets” as amounts due from employees and
management team and amounted to CHF 0.6 million in 2013 (CHF 0.6 million in 2012) (see note 26(iii)).
During the current year, the Group entered into the following non-cash investing and financing activities which are not reflected in the
consolidated statement of cash flow:
Capitalization of interest of CHF 9.5 million over projects under constructions (see note 11).
Transfer of work in progress of CHF 36.0 million from inventory to property, plant and equipment.
Deemed loss of control of ASA Group. For further details refer to note 39.
Settlement of borrowings of CHF 110 million by Mr. Samih Sawiris. For further details refer to note 33.
Taba Heights Company transactions
One of the Group companies had been granted the right to acquire freehold title to the project's land by the Tourism Development Authority.
Due to foreign ownership restrictions on the Sinai Peninsula becoming applicable in connection with the reorganization, the respective
Group company had to be transferred to Mr. Samih Sawiris, major shareholder and of Egyptian nationality. Mr. Samih Sawiris entered into a
binding agreement to retransfer these shares subject to approval of the competent authorities, and that until such retransfer, the Group
would be put into a position as the full economic beneficiary of these shares. This entails, inter alia, an irrevocable assignment of dividends and
the authorization to collect dividends, exercise voting rights related to these shares and cause the sale of shares with no additional rights of
Mr. Samih Sawiris in any value received.
Iskan International Project W.L.L. Inc. Transaction
Iskan International Project W.L.L. Inc. (Iskan) entered into a purchase agreements with Sifah Tourism Development Company (S.A.O.C) and
Salalah Beach Tourism Development Company (S.A.O.C) to acquire a total of 172 real estate properties. Mr. Samih Sawiris is a major
shareholder in Iskan. The contracts are based on normal commercial terms and conditions. In the second quarter of 2012, 51 real estate
properties of the remaining 134 units were re-acquired by the Group to increase the number of available hotel rooms in the Oman
subsidiaries. The residual 83 units owned by Iskan as at 31 December 2013 have a value of USD 28.2 million (equals CHF 25.1 million). As a
result of the re-acquisition trade and other receivables balances in the Group’s consolidated financial statements were reduced from US$
23.7 million (equals CHF 21.1 million) as at year end 2011 to US$ 2.3 million (equals CHF 2.1 million) as at 31 December 2012 which are still
outstanding as at 31 December 2013, however were netted against prepayments received from Iskan for other units. Losses in relation to the
reversal of the sales of CHF 7.4m were recognized in “other gains and losses” in 2012. No related revenue has been recognized during the
current period.
Securities lending agreement
For further details on this transaction refer to note 30.5.
Rental contract for office building in Cairo
Orascom Hotel and Development, a wholly owned subsidiary of Orascom Development Holding AG, has a five year rental contract fo r 1,701
square meters office space in Nile City office building- Cairo where its owned headquarters are currently situated, the contract was
transferred in 2010 among other similar contracts totalling 11,274 square meters to a Joint Stock company which is majority owned by the
Chairman amongst others. The basic annual rental value under this contract is USD 903,420 payable in advance on quarterly basis which is
in line with the other contracts transferred (there are other standard parking, deposit and maintenance clauses in the contract that are the
same for all other units in the same building).
TU Berlin transaction
In October 2012, the Technische Universität Berlin (TUB) opened its satellite campus in El Gouna. TUB is one of the global leading technical
universities. The campus was built by a subsidiary of ODH and the building costs have been charged to the current account of Mr. Samih
Sawiris. The complex spans an area of 10,000 square meters and encompasses a lecture hall, an exhibition and reader panel as well as seven
seminar, office and laboratory buildings. The opening is the result of a successful collaboration between the Egyptian and German Ministries
of Education, the TUB, Orascom Development and the Sawiris Foundation for Social Development.
Explanation of other movements
46 OPERATING LEASE ARRANGEMENTS
46.1 The Group as lessee
46.1.1 Leasing arrangements
Operating leases relates to car lease with lease terms of between 2 to 4 years and office facilities with lease terms of 25 ye ars. The Group (as
a lessee) does not have an option to purchase these leased assets at the expiry of the lease periods.
46.1.2 Payments recognised as an expense in the period
CHF
Minimum lease payments
TOTAL
2013
2012
1,041,668
1,629,825
1,041,668
1,629,825
46.1.3 Non-cancellable operating lease commitments
CHF
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
TOTAL
Total of future minimum lease
payments
2013
2012
232,800
210,600
931,200
842,400
3,492,000
3,369,600
4,656,000
4,422,600
In respect of non-cancellable operating leases, no liabilities have been recognised.
46.2 The Group as lessor
46.2.1 Leasing arrangements
Operating leases relate to the investment property owned by the Group with lease terms of between 1 and 4 years for premises in El Gouna
(Egypt) and 25 years for the resort in Mauritius (CMAR classified as disposal group). These lease contracts do not include a lease extension
option and are subject to renegotiation at the end of the lease term. The lessee does not have an option to purchase the property at the expiry
of the lease period.
Rental income earned by the Group from its investment properties and direct operating expenses arising on the investment properties for the
year are set out in note 17.
46.2.2 Non-cancellable operating lease receivables
Part of the amount due from El Gouna Football Club was settled by Mr. Samih Sawiris, which is the main reason for the decrease in related
party receivables. The residual balance will be settled over the next four years as a settlement of the dues on El Gouna Football Club to OHD
resultant from the sponsorship agreement.
CHF
The decrease in payables is mainly due to the amount due to Besix Group which was deconsolidated due to the deemed loss of control of ASA
and its subsidiaries (note 39). The decrease was partially off-set by an increase in payables in connection with Falcon due to net operating
profits taken over from a joint project.
Later than 5 years
2013
2012
Not later than 1 year
5,378,507
5,189,230
Later than 1 year and not longer than 5 years
22,611,457
21,815,733
TOTAL
30,903,182
36,141,306
58,893,146
63,146,269
F-82
2013 Annual Report
47 COMMITMENTS FOR EXPENDITURE
companies shall be financed (debt) by local financial institutions, co-investors, Omran (shareholder in Omani project companies) in addition
to the Group.
The following commitments for expenditure have been made for the future development of the respective projects:
Morocco
CHF
2013
Salalah Beach Tourism Development Company (S.A.O.C)
3,318,376
Sifah Tourism Development Company (S.A.O.C)
1,067,732
Eco-Bos Development Limited (i)
4,745,891
In Morocco, the DA does not contemplate the concept of MBOs. However it sets out a timeline for the performance of the essential elements
of a development plan. These essential elements have no fixed dates but are rather governed by interconnected milestones that change the
date automatically on the occurrence of an agreed milestone.
47.1 Minimum Building Obligations
In 2010 the project company obtained an exception entitling it to finalize three hotels in 2013 and the remaining two in 2015. Since then the
project company has created the organisational structures for the creation of three hotels and the related infrastructure. However, further
process by the project companies was delayed by various factors outside the control of the project companies and they therefore have solid
grounds for requesting further extensions. Especially since the DA states that in the event the delay is for reasons outside of the control of the
project company, this would be taken into consideration when assessing whether the project company has fulfilled its obligations or not. In
furtherance and in compliance with the obligations to which the project company is committed to, a new hotel holding structure has been
proposed, the main goal of which is the creation of the 3 Hotels and the associated infrastructure, which is part of phase 1. The scope of
investment for the aforementioned hotel holding structure is approximately CHF 160 million out of which the Group is expected to inject
approximately CHF 22million of cash equity over the next 3 years. The rest of the financing package is currently being finalized and
preliminary term-sheets from internationally renowned development banks, local financial institutions and other shareholders is currently
under review.
Beside the legally binding commitment for expenditure mentioned above the following should be considered:
Risk assessment of contingent liability
One part of the Group’s business is to acquire land for the development of tourism projects. Out of these business opportunities often no
legally binding commitments incur however the Group has unbinding business opportunity commitments in relation to their projects. In
particular the Group has minimum building obligations (“MBOs”) for the next five years which are included in their development agreements
(“DAs”) with the relevant governments in Oman, Morocco and Montenegro. While the potential near term financial impact is insignificant for
Montenegro as deadlines for such obligations are still several years away, the contingent liabilities in relation to the MBOs in Oman and
Morocco need further consideration and are assessed by management of the Group as follows:
Management has analysed the various MBOs and is comfortable with the current status of the MBOs and the minimum investment
obligations. Albeit that certain delays have or may potentially occur, all such delays were well founded and are premised on le gal grounds that
would protect the Group from any exposure. The Group has exerted a great deal of negotiations in all destinations to ensure that any delays
are communicated to local authorities and thereby working alongside the government in rescheduling and extending the completion dates.
Additionally, the Group has worked on securing finance schemes to accommodate the newly developed restructuring of the investment
obligations, or in cases were completion dates are at risk, expending the necessary amounts to comply with the contractual obligations.
(i) As per the property management agreement between Eco-Bos and Imerys (shareholder in Eco-Bos) , Eco-Bos has the right but not the
obligation (American call option maturing in 2030) to purchase part or all of 6.6 million square meters (divided on 7 independent plots),
which is currently owned by Imerys Mineral Limited. An annual option premium is paid to retain the rights and the purchase price is
calculated based on an agreed dynamic pricing formula. The trigger event of the option(s) is at the full discretion of Eco-Bos and shall only
be exercised when building permits are attained. Currently Eco-Bos is in negotiations with the local authorities and other investors and is
taking its time to optimize on the best alternatives for the development.
Oman
According to the DAs for Salalah and Sifah, the project companies, which are subsidiaries of the Group, shall use their best efforts to
substantially complete a defined amount of Hotels and Golf Courses within an indicative timeline. Based on this indicative timeline, the
project companies have been granted an extension of time for the substantial completion (which is defined as the material elements of the
specific MBOs) of the MBOs that elapses on 1 January 2015. In Salalah, the project company shall develop three or four hotels, which shall be
fixed at a total of 700 keys in addition to an 18-holes golf course. To date, the project company has completed 2 hotels with a total number of
481 keys and preparatory works for the golf course have also been finalized. In Sifah, the project company shall complete a total of 500 keys
in addition to an 18-holes golf course. To date, the project company has completed 1 hotel with 55 keys, in addition to 25 apartments, which
shall be annexed to the aforementioned hotel. The project company has further assigned the rights and obligations of completing two
additional hotels to Jebel Resort Development Company (an external developer). The first hotel is 180 keys and the second is still under study,
as the drawings have not been completed.
Based on the right to request an extension of the completion date, which is included in the DAs, the Group has requested an extension for the
time of completion of the residual MBOs until 2018. The completion timelines dictated by the DAs are subject to two general standards which
must be taken into consideration wherever there is a delay in completion. As per the DA, the project companies must perform the MBOs on
or before the completion date using (i) their Best Efforts, and (ii) in applying Best International Practices. These two standards are in the favour
of the project companies, specifically when taking into account the exigent economic and financial environment during which the project
companies had to comply with the completion dates. The difficulty in completion is supported by conclusive evidence that financial institutions
in Oman have refrained from providing any financing for development of tourism projects for a period of over two years as of the Arab Spring.
Notwithstanding such difficulties in financing, the project companies have progressed extensively in their development, given the
circumstances. The developments that have been finalized by the project companies to date have not been matched by any other developer in
Oman. This provides irrefutable evidence that even if a delay occurs, the project companies would not be in breach of the DAs, since they will
have satisfied the threshold dictated by the DAs. Based on the foregoing, the request to extend the MBO completion date to 2018 is hence
reasonable.
To avoid any potential risk, the business plan of the Group includes two scenarios that would ensure that the project in Oman is fully covered
from a financial perspective that would ensure compliance to the MBO completion date.
To avoid any potential risk, the business plan of the Group includes different scenarios that would ensure that the projects in Oman are fully
covered from a financial perspective which would ensure compliance to the MBO completion. The different scenarios are sensitized for
timing and specifications of the hotel properties (i.e. star level) but assure that total room keys are achieved. Based on the above, and due to
ongoing negotiations, management is unable to accurately assess the exact total investment value at this stage but projects a total investment
range between CHF 150 million and CHF 300 million over the next few years (until 2017). The aforementioned investments by the project
48 LITIGATION
Falcon
The financial statements of Falcon Company for Hotels (“Falcon”) were incorporated into ODH’s consolidated financial statements at 31
December 2008 in accordance with the International Financial Reporting Standards, as a result of the business combination previously
effected through one of ODH’s subsidiaries whereby control had existed over Falcon at that time.
Subsequent to the first time consolidation, but prior to the completion of the transfer of the legal title on the Egyptian Stock Exchange (EGX),
a dispute over the Falcon securities purchase agreement had arisen. At the beginning of October 2009, the Group ceased consolidating
Falcon due to changes in Falcon’s management resulting in a loss of control for the Group which was one of the reasons of the dispute.
Several arbitration and litigation proceedings involving Falcon, the Group and third parties have been and are still pending. However, during
2012 some positive progress has been achieved in one of the major arbitration proceedings involving Falcon’s original owners and a third
party having a direct impact on the whole dispute. This positive progress improves chances for ultimate recovery of the Group’s investments.
Further in July 2013, an award was issued in favour of one of ODH’s subsidiaries establishing ODH’s subsidiary’ right for compensation for the
breaches made by Falcon and its owners. The exact amount of the compensation is subject to another set of arbitration proceedings. This
particularly strengthens the position of the Group in recovering all its losses suffered as a result of this dispute.
F-84
2013 Annual Report
Withdrawals of land by the government
Land withdrawal of 6th of October in Egypt
2000 Acres
With reference to the purchased land in Sixth of October city (2000 acres) in Egypt, the Urban Communities Authority related to the
Ministry of Housing issued its resolution on 11 December 2011 to grant one of the subsidiaries of ODH an area of 1,000 acres rather than
2,000 acres on the condition of completing the construction works on this area not later than 30 September 2013.
Since it is challenging for the subsidiary to fulfil the construction obligation during that period of time and as it is contrary to the terms of the
initial contract with the Authority, the Group’s entity challenged this decision and filed an administrative complaint against it. This has resulted
in further complications; as the Urban Communities Authority has then decided to withdraw the allocation of another 380 acres, accordingly
the Group’s entity now has just 620 acres. The Group’s subsidiary further challenged this decision and is in the process of going through
several administrative and judicial channels to overturn. No administrative resolution or decision has been issued as of the date of this report.
It is expected that this process will be lengthy. Nevertheless, some progress has been made with the Interim Government and there seems to
be a possibility of reaching a settlement of this matter. Currently there are discussions with the Ministry of Housing that involves also the
Ministry of Investment in order to enable OHC to redeem the entire land against the payment of the full price in advance. OHC is also
attempting to get 10 years to develop the whole remaining land. Discussions on this particular piece of land are progressing but with no results
yet.
Land withdrawal at Al Fayoum Project:
In addition, Fayoum Governorate, Egypt, issued a resolution on 11 June 2011 to terminate the contract signed 9 June 2007 for the purchase of
a piece of land in Fayoum Governorate, Egypt, taking into consideration that the Group started major construction work on that land worth
EGP 11 million (equals CHF 1.7 million). The subsidiary of ODH requested the cancellation of this decision. As a result, the Conciliation
Commission within the Governorate of Fayoum issued a resolution on 3 October 2011 recommending the cancellation of the termination
decision issued by the Fayoum Governorate. On the basis of this decision, the subsidiary has raised a law suit to the Egyptian judiciary to
cancel the decision or, alternatively, to be receiving compensation from the government equivalent to the buildings constructed on the land
repossessed by the Governorate. No judgement or decision has been issued as of the date of this report.
Land withdrawal at Royal Azur
In January 2012, Royal Azur for Tourism and Real Estate Development (“Royal”) agreed, as part of an overall settlement with the Tourism
Development Authority (“TDA”), to voluntarily relinquish its legal claims and return the land. As part of the settlement, Royal would take the
land subject of dispute on a leasing basis together with the buildings until an agreement is reached for the repurchase of the land by Royal. This
undoubtedly allows Royal the time to rethink the entire purchasing scheme and avoids a lengthy litigation with the TDA.
49 OTHER SIGNIFICANT EVENTS THAT OCCURRED DURING THE
REPORTING PERIOD
Political situation in Egypt
Egypt is the Group’s largest operating destination and its main source of operating revenues. Egypt remains locked in a prolonged process of
political transition since January 2011, which included acts of civil unrest and a series of demonstrations. This has led many European countries
to issue several travel warnings and travel bans on Egypt. This ongoing political uncertainty has negatively impacted most of the Egyptian
economic sectors and particularly the tourism sector (The Group’s key operating sector in Egypt). Adding to that the limited economic
growth, currency devaluation and increased inflation have all affected the demand on the second home market (Affecting the Group real
estate sales).
However, the current efforts exerted by the rolling governing authorities to restore economic growth, along with the drafting of the new
constitution and its acceptance in addition to the expected parliamentary and presidential elections in early 2014, the country has been
signalising growing confidence in its ability to impose security after the unrest. Egypt has succeeded in convincing many countries to ease the
travel bans for Egypt.
Additionally, Egypt will remain a hub for foreign investments, whereas the economic fundamentals are still intact to a large extent; its
attractive location at a crossroad between Europe, the Middle East and Africa as well as the fact that Egypt remains one of the Arab world’s
most diversified economies.
Should the latter positive events materialize, the Group Management believes that the Group is fundamentally well positioned, with a solid
portfolio of hotels and real estate infrastructure as well as cost savings and monetization programs on track, to quickly recover from this
downturn and bounce back to earlier positive operational levels.
50 SUBSEQUENT EVENTS
None
51 APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the directors and authorized for issue on 14 April 2014.
F-86
2013 Annual Report
REPORT OF THE STATUTORY AUDITOR
To the General meeting of Orascom Development Holding AG, Altdorf
Report of the Statutory Auditor on the Consolidated Financial Statements
As statutory auditor, we have audited the accompanying consolidated financial statements of Orascom Development Holding AG, Altdorf,
which comprise the consolidated statement of financial position as at 31 December 2013, and the consolidated statement of comprehensive
income, consolidated statement of changes in equity, consolidated cash flow statement and notes (pages F-3 to F-86) for the year then
ended.
Orascom
Development
Holding AG
Board of Directors’ Responsibility
The Board of Directors is responsible for the preparation of these consolidated financial statements in accordance with International
Financial Reporting Standards and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an
internal control system relevant to the preparation of consolidated financial statements that are free from material misstatement, whether
due to fraud or error. The Board of Directors is further responsible for 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. We conducted our audit in
accordance with Swiss law and Swiss Auditing Standards and the International Standards on Auditing. Those standards require that we 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 ofthe consolidated
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system
relevant to the entity’s preparation 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 system. An audit also
includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, 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.
Opinion
In our opinion, the consolidated financial statements for the year ended 31 December 2013 give a true and fair view of the financial position,
the results of operations and the cash flows in accordance with International Financial Reporting Standards and comply with Swiss law.
Report on Other Legal Requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article
728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists,
which has been designed for the preparation of the consolidated financial statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
Deloitte AG
Roland Müller
Licensed Audit Expert
Auditor in Charge
Zurich, 14 April 2014
Oliver Köster
Statutory financial statements
together with auditor's report for the
year ended 31 December 2013
F-88
2013 Annual Report
Statutory balance sheet
Income statement
CHF
Notes
2013
2012
Interest income
Management fee
Other revenues
Total revenues
4,246,371
6,386,327
448,830
807,000
40,309
35,499
4,735,510
7,228,826
Operating expenses
Personnel expenses
(11,903,129)
(9,230,810)
Marketing expenses
(94,021)
(618,079)
Depreciation of fixed assets
(33,969)
(23,792)
Impairment of receivables
-
Other operating expenses
Total operating expenses
(7,268,864)
(4,684,220)
(8,337,780)
(16,715,339)
(25,479,325)
Other income/expenses
Amortization of incorporation and organization costs
4
(3,454,864)
(6,234,903)
Impairment on investments
8
(4,899,970)
(998,292,000)
(3,664,627)
(3,655,709)
Other finance expenses
Exchange rate differences
Total other income/(expenses)
-
(5,000,000)
(5,383,960)
991,925
(17,403,421)
(1,012,190,687)
Extraordinary revenues and expenses
Extraordinary revenues from previous years
-
Extraordinary expenses from previous years
-
(2,246,507)
Total extraordinary revenues and expenses
-
(2,189,569)
Net (loss) for the period
Notes
31 December 2013
31 December 2012
23,431,206
14,174,082
1,606,623
15,106
777,143
2,192,700
1,582,138
119,164
2,073,853
332,050
28,022,778
18,281,287
504,139
2,608,990
153,094,433
1,400,445,993
308,466
6,063,854
310,083,444
1,334,083,963
Total non-current assets
1,556,653,555
1,650,539,727
Total assets
1,584,676,333
1,668,821,014
-
10,678,409
24,389,017
831,990
553,250
2,614,428
1,519,578
18,402,000
73,127,911
517,594
1,779,731
2,348,673
-
48,310,263
88,452,318
45,626,627
372,671
60,357,907
260,767
Total long-term liabilities
45,999,298
60,618,674
Total liabilities
94,309,561
149,070,992
662,201,010
589,600
662,201,010
589,600
Assets
Revenue
Interest expense
CHF
(29,383,250)
56,938
(1,032,630,755)
Current assets
Cash at bank
Other receivables
- Affiliated companies
- Related parties
- Third parties
Own shares
20
11
Total current assets
Non-current assets
Fixed assets
Incorporation and organization costs
Receivables – Affiliated companies
Investments
5
4
20
8
Liabilities and shareholders’ equity
Short-term liabilities
Bank overdraft
Other payables
- Shareholder
- Third parties
Accrued expenses
Provisions
Deposit received
7
20
Total short-term liabilities
Long-term liabilities
Other payables
Long-term liabilities
Shareholders’ equity
Share capital
Reserve for own shares
Capital contribution reserve (privileged)
- Additional paid-in capital (agio)
- Reserve for own shares
- Other reserve
Other reserve
Accumulated losses
Net (loss) of the period
20
9
11
10
11
2,257,026,456
1,720,610
741,225,115
11,953,838
(2,154,966,607)
(29,383,250)
2,507,026,456
178,708
492,767,017
11,953,838
(1,122,335,852)
(1,032,630,755)
Total shareholders' equity
1,490,366,772
1,519,750,022
Total liability and shareholders‘ equity
1,584,676,333
1,668,821,014
Samih Sawiris
Chairman / Group CEO
Eskandar Tooma
Group CFO
F-90
2,999,972,181
1,490,366,772
(29,383,250)
-
-
-
1,519,750,022
1,519,750,022
(1,032,630,755)
-
2,552,380,777
Total
Cash flow statement
CHF
(2,184,349,857)
(29,383,250)
-
Depreciation of fixed assets
Amortization of incorporation and organization cost
(29,383,250)
33,969
(1,032,630,755)
23,792
3,454,864
6,234,903
-
5,000,000
Impairment on investments
4,899,970
998,292,000
Provision formed
(829,095)
-
Other finance cost
741,225,115
1,720,610
2,310,210
2,257,026,456
2,257,026,456
753,178,953
891,823
(891,823)
-
Decrease in trade and other receivables
Increase in due from affiliated parties
(Decrease) in trade and other payables
662,201,010
7,291,995
(13,394,188)
(84,748)
(39,413)
(13,899,291)
(18,464,183)
Increase in other liabilities
17,893,381
604,619
(41,249,239)
(47,081,230)
Cash used in operating activities
Cash flows from investing activities
Payments for fixed assets
-
(29,262)
Increase in investments of subsidiaries
-
(5,000,000)
Net cash used in investing activities
-
(5,029,262)
61,702,106
57,870,539
Cash flows from financing activities
Increase in liabilities against shareholder
(Decrease) in bank overdrafts
(Increase)/Decrease of own shares
Net cash generated from financing activities
Cash and cash equivalents as at beginning of the financial year
Cash and cash equivalents as at end of the financial year
Thereof privileged capital
contribution reserve
Loss for the period
1,400,768
(24,735,807)
(Decrease) in due to affiliated parties
Net increase in cash and cash equivalents
-
-
(2,433,725)
250,000,000
2,433,725
-
(250,000,000)
Reallocation of reserves
2012
Movements in working capital
Own shares
Distribution to Board Members and
revaluation
(2,154,966,607)
504,720,855
768,308
662,201,010
2,507,026,456
(2,154,966,607)
504,720,855
768,308
2,507,026,456
662,201,010
(1,032,630,755)
(Loss) for the period
(1,122,335,852)
1,285,559
503,435,296
2,053,867
(1,285,559)
-
2,507,026,456
662,201,010
Reduction of own shares
Retained
earnings
Other reserves
Reserve for own
shares
Additional paidin capital (agio)
Share capital
CHF
2013
Cash flows from operating activities
(Loss) for the period
Statement of changes in equity
F-92
2013 Annual Report
(10,678,409)
(517,334)
(154,875)
1,721,817
50,506,363
59,437,481
9,257,124
7,326,989
14,174,082
6,847,093
23,431,206
14,174,082
2013 Annual Report
Notes to the financial statements
8 INVESTMENTS
1 GENERAL
Investments are valued at acquisition cost less adjustments for impairment, if any. On a regular basis the Company’s managem ent reviews the
recoverable value of the Company’s investments in the various destinations, and accordingly reduce the carrying value by impairment losses
if any.
The purpose of the Company is the direct or indirect acquisition, durable management and disposal of participations in domestic or foreign
enterprises, in particular in the field of real estate, tourism, hotels, construction, resort management, financing of real estate and related
industries as well as the provision of related services.
2 PLEDGED ASSETS TO SECURE OWN OBLIGATIONS
Andermatt Swiss Alps AG (ASA) has obligations towards the canton of Uri and the municipality of Andermatt. ASA is responsible for the
construction of certain parts of the tourism resort Andermatt. Within certain periods of time or should the construction work be stopped for
whatever reason, ASA has the obligation to rebuild the relevant plots of land to the original state. As at 31 December 2013, 36,985 ASA
shares owned by the Company (2012; 36,985) with a net book value of CHF 957 each, amounting to a total book value of CHF 35,384,945
(2012: CHF 36,985,000), have been pledged as a security to the canton and municipality. Additionally, land with a value of CHF 1,000,000
has been pledged (31 December 2012: CHF 1,000,000).
2013
2012
Cars
Office rent
4,656,000
The valuation model of the Company captures the different investments, whether greenfield projects, brownfield projects, or operating
projects. The valuation model adopts various approaches depending on the category of the project, as for the greenfield projects and
brownfield projects, the model keeps it at investment cost given the uncertainty of the future assumptions and the absence of track record for
those projects. One of the major contributors to the investments’ value is land banks in Egypt. Its value depends very much on developments
and sales that are achievable over a long-term period. Due to this long-term view and the current political and economic situation there
remains a significant uncertainty.
For the operating projects, DCF valuation techniques applying a two-phase model for the hotels segment were used. The first phase is a 5year period which shows the evolving status of the hotel segment indicated by being back to the operating standards of before the 2011
revolution. And the second phase is a 5 year period which shows the steady performance of the hotel operations. Major underlying
assumptions are occupancy and average room rates for hotels and the number of real estate units to be sold. The various assumptions and
future projections incorporate the various political, economic and operational facts prevailing at the time of preparing the valuations. Future
developments may impact the value.
3 OFF-BALANCE-SHEET LEASING COMMITMENTS
CHF
The Egyptian revolution in 2011 has negatively affected the performance of the Company’s Egyptian arm under Orascom Hotels &
Development S.A.E. (“OHD”). OHD’s different operating segments, especially the real estate and hotels being the key revenue and value
drivers of OHD, have been negatively affected by the deteriorated economic conditions that took place in Egypt. This is represented in
downsized demand on real estate purchases and declined flow of tourists. During 2013 the performance of OHD’s different segments
continued to suffer from the events. Management believes that after the presidential election Egypt will return to stability and continuous
recovery within the next 5 years. However, against this background, there still remains significant uncertainty in relation to the future
economic performance.
4,422,600
4 INCORPORATION COSTS
Incorporation costs relate to the public offering in relation to the capital increase in September 2010. Incorporation costs are capitalised and
amortised over a period of five years.
5 FIRE INSURANCE VALUE OF FIXED ASSETS
The fire insurance value of fixed assets at 31 December 2013 amounts to CHF 731,000 (31 December 2012: CHF 731,000).
6 LIABILITIES TOWARDS STAFF PENSION SCHEMES
Current liabilities at 31 December 2013 amount to CHF 30,593 (31 December 2012: CHF 7,777).
Based on these valuations, the value of the investment in OHD exceeds its carrying amount by a substantial amount. The Company’s
management considers the carrying amount of OHD as fairly stated and reflecting its realizable value as at 31 December 2013. However,
there remains a significant uncertainty as to the assumptions used in the valuation.
At 31 December 2013, the Company directly holds the following investments:
Company, domicile, purpose
Ownership %
31
31
December
December
2013
2012
Share capital
Orascom Hotels & Development S.A.E.
(previously: EL Gouna Development & Hotels S.A.E.), Egypt
Real estate development, hotel management
99.68%
99.68%
EGP
1,109,811,630
Arena for Hotels Company S.A.E., Egypt
Hotel operation
99.85%
99.85%
EGP
20,000,000
Orascom Development & Management Limited, Cyprus
Management company
100.00%
100.00%
EUR
1,000
ORH Investment Holding Ltd, BVI
International holding company
100.00%
100.00%
USD
125,000,000
7 OTHER PAYABLES – SHAREHOLDER
Lustica Development AD, Montenegro
Real estate development, hotel management
51.00%
51.00%
EUR
25,000
The balance of “Other payables – Shareholder” as at 31 December 2013 due to Mr. Samih O. Sawiris in the amount of CHF 24,389,017 (31
December 2012: CHF 73,127,911) has decreased following the capital increase of Andermatt Swiss Alps AG (see note 8 for further details).
Andermatt Swiss Alps AG, Switzerland (ASA)
Real estate development
49.00%
100.00%
CHF
231,147,000
100.00%
100.00%
CHF
100,000
Orascom Development International AG, Switzerland
Real estate development
Andermatt Swiss Alps AG
As of 25 June 2013 the capital of Andermatt Swiss Alps (ASA) was increased from CHF 42,000,000 to CHF 231,147,000. The Company
participated in this capital increase by converting its loan receivable in the amount of CHF 71,262,000 into capital. Mr. Samih O. Sawiris
F-94
2013 Annual Report
participated with an amount of CHF 117,885,000. He paid an amount of CHF 7,444,000 in cash and converted a receivable in the amount
of CHF 110,441,000 into capital.
The latter amount represented the Company’s payable to Mr. Samih O. Sawiris as at 25 June 2013, which was transferred to Mr. Samih O.
Sawiris together with a receivable from ASA in the same amount. As a result of this transaction, Mr. Samih O. Sawiris became the new
majority shareholder with a 51% share and will act as new Executive Chairman of ASA. On the other hand, the Company remained
shareholder with a 49% share, but lost control over ASA.
In connection with the loss of control for the ASA investment, the Company performed a fair value valuation, which resulted in impairment in
the amount of CHF 4,899,970.
Orascom Development Holding AG, as the Parent Company of the Group, is fully integrated into the Group-wide internal risk assessment
process. Such assessment is performed bottom-up and top-down with final conclusions consolidated in the Group Finance Function.
The Group’s entities report periodically to the Group Finance on their current operations and financial situation. Various reports and analysis
have been implemented to allow the Group to monitor the operations closely and immediately identify risks. In managing the Co mpanies vital
activities and controlling the risks within those activities the Company pursuits a policy of centralization at the corporate level in which the
bank accounts, the fixed assets, the collection of receivables and material transactions are controlled at the corporate level with certain
approvals required to exercise or execute any of the above.
Management is efficiently and effectively assisted into taking decisions based on the short term operating level and long term strategic level
through the various reports that are provided through the system. In addition to that there is a monthly as well as quarterly reporting package
and a set of key performance indicators on the entity and segment level that enable the management to monitor the business, take decisions
and undergo corrective action whenever necessary.
9 SHAREHOLDERS’ EQUITY
As at 31 December 2013 the Company's share capital of CHF 662,201,010 was divided into 28,543,147 registered shares with a par value
of CHF 23.20 each. The share capital is fully paid-in. The registered shares of the Company are listed on the Swiss Exchange (SIX). The
Company has also issued Egyptian Depository Rights (EDRs) which are traded on the Egyptian Stock Exchange (EGX).
Par Value CHF
13 RISK ASSESSMENT
Shares #
CHF
Share capital
23.20
28,543,147
662,201,010
Conditional capital
23.20
5,624,556
130,489,699
10 PRIVILEGED CAPITAL CONTRIBUTION RESERVES
As of 1 January 2011, Swiss tax authorities introduced a new regulation concerning capital contribution reserves. The new regulation foresees
the exemption of distributions from the capital contribution reserves, which were received after 31 December 1996 from Swiss income and
withholding tax. In order to reflect this new regulation, capital contribution reserves have been classified separately in the balance sheet. The
tax authorities have approved capital contribution reserves in the amount of CHF 2,999,972,182.
As accumulated losses as of 31 December 2012 exceeded more than half of the share capital and legal reserves, the General Assembly
approved as part of the Annual General Meeting of 13 May 2013 the proposal of the Board of Directors to reallocate CHF 250,000,000
additional paid-in capital (agio) to Other reserve in order to meet the requirements of article 725 paragraph 1 CO.
11 OWN SHARES
As of 31 December 2013, the Company had 150,701 own shares (31 December 2012: 26,249) at an average transaction price of CHF
15.33 per share (31 December 2012: CHF 29.27 per share). Own shares are stated at the lower of cost or market value for an amount of
CHF 2,310,210 (31 December 2012: CHF 322,050). The increase in own shares is due to the partial settlement of the account receivable
from Garannah with 124,441 shares at a market price of CHF 15.40.
12 ACCOUNTS RECEIVABLES FROM THIRD PARTIES
Accounts receivables are included after a deduction for bad debtors. Further, accounts receivables include a position in the amount of CHF
545,299 (31 December 2012: 1,918,897), whose value is determined by the market value of ODH EDRs (in prior year ODH shares and
EDRs). This position is valued at lower of cost or market.
In addition, the Group Finance has a function for risk assessment and internal control. A risk matrix is regularly updated for the most
significant entities of the Group. All information from the entities is reviewed and consolidated by Group Finance and is shared and discussed
with the Executive Management on a regular base. A more formal reporting on risks over financial reporting was made prior to year-end to
the Board of Directors.
The Board of Directors in turn performs and reviews its risk assessment on an annual basis covering more long-term operational and strategic
risks to the Group. The conclusions of such risk assessment are also considered by Group Finance.
The risk mitigating actions are performed on the segment and entity level. The Group has centralized certain functions to be able to identify
and control risks more closely. This risk assessment also covers the specific risks related to unconsolidated financial statements of Orascom
Development Holding AG.
14 SIGNIFICANT SHAREHOLDERS
31 December 2013
Name of holder
Samih Sawiris (i)
Number of
shares
17,914,355
31 December 2012
%-ownership of
total equity
capital and
voting rights
Number of
shares
62.76%
%-ownership of
total equity
capital and
voting rights
17,907,121
62.74%
1,623,250
5.69%
1,542,643
5.40%
Others
9,005,542
31.55%
9,093,383
31.86%
28,543,147
100.00%
28,543,147
100.00%
TOTAL
(i)
The shares of Samih Sawiris are held directly and through his entities Thursday Holding (Ex-TNT Holding) and SOS Holding.
15 REMUNERATION OF THE BOARD OF DIRECTORS AND
A detailed overview of the remuneration of the Board of Directors and Executive Management is provided in the consolidated financial
statements.
16 POLITICAL EVENTS IN EGYPT
Some substantial political events have taken place in Egypt since January 2011 that have impacted various sectors of the economy and which
may well lead to a decline in the economic activities in the future. These events may have a consequential impact on the Group’ s operations in
future financial periods.
17 JOINT LIABILITY IN FAVOUR OF THIRD PARTY
The company, together with certain Swiss subsidiaries , is part of a Swiss value added tax (VAT) group, resulting in a joint liability for taxation
for VAT purposes.
F-96
2013 Annual Report
F-98
18 CONTINGENT LIABILITIES
On 6 September 2012, Bellevue Hotels and Apartments Development AG (BHAD) and Acuro Immobilien AG entered into a real estate
purchase agreement (the Purchase Agreement) and Orascom Development Holding AG guarantees for this agreement in case that BHAD
should not be able to fulfil its duties against Acuro. The guaranty is limited to CHF 100 million. This agreement is in the sense of article 111 of
the Swiss Code of Obligations and not as a surety pursuant to article 492 et seqq of the Swiss Code of Obligations.
19 SIGNIFICANT NON-CASH TRANSACTIONS
The following significant non-cash transactions are eliminated in the cash-flow statement:
Capital increase in Andermatt Swiss Alps AG by conversion of a loan receivable in the amount of CHF 71,262,000 into capital.
At 25 June 2013, the company had payables to Mr. Samih O. Sawiris in the amount of CHF 110,441,000. This payable was set off
against a receivable which the company had against ASA in the same amount.
REPORT OF THE STATUTORY AUDITOR
To the General meeting of Orascom Development Holding AG, Altdorf
Report of the Statutory Auditor on the Financial Statements
As statutory auditor, we have audited the accompanying financial statements of Orascom Development Holding AG, Altdorf, which
comprise the income statement, balance sheet, statement of changes in equity, cash flow statement and notes (pages F-89 to F-97) for the
year ended 31 December 2013.
Further information on these transactions is included in note 8 Investments.
Board of Directors’ Responsibility
20 RECLASSIFICATIONS
The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the
company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant
to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is
further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the
circumstances.
Certain reclassifications in the prior year balance sheet and the cash flow statement have been made in order to be in line with the current
period presentation.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss
law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the
entity’s preparation of the 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 system. An audit also includes evaluating the
appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall
presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the financial statements for the year ended 31 December 2013 comply with Swiss law and the company’s articles of
incorporation.
Without qualifying our opinion, we draw your attention to note 8 to the financial statements disclosing the existence of a significant
uncertainty relating to the valuation of the investments in subsidiaries.
2013 Annual Report
Report on Other Legal Requirements
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article
728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists,
which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.
We recommend that the financial statements submitted to you be approved.
Deloitte AG
Roland Müller
Auditor in Charge
Zurich, 14 April 2014
Oliver Köster
F-100
190
Orascom Development
9. Glossary of Terms
AG: Aktiengesellschaft (abbr. AG) is the German name for a stock corporation.
MENA Middle East and North Africa
ARR: Average Room Rate is a statistical unit often used in the lodging industry.
The ARR is calculated by dividing the room revenue(excluding services and
taxes) earned during a specific period by the number of occupied rooms.
OHM Orascom Hotels Management
Company: Orascom Development Holding AG.
EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization is
an indicator of a company’s financial performance, calculated as total revenue
less total expenses, excluding tax, interest, depreciation and amortization.
EBITDA is essentially net income with interest, taxes, depreciation, and
amortization added back to it, and can be used to analyze and compare
profitability between companies and industries because it eliminates the
effects of financing and accounting decisions.
EBITDA Adjusted: Earnings Before Interest, Taxes, Depreciation and
Amortization adjusted to better reflect optimization of core operating
activities net of any extraordinary items such as Provisions & impairments,
FOREX losses, Capitalized G&A expenses, Share in associates and Fair
value differences.
RevPAR Revenue Per Available Room equals average room rate (ARR)
multiplied by average occupancy.
SESTA Swiss Federal Act on Stock Exchanges and Securities Trading of 24
March 1995 (Bundesgesetz vom 24. März 1995 über die Börsen und den
Effektenhandel, BEHG).
SIS SIS SegaInterSettle AG provides securities settlement and custody
services in the Switzerland.
SIX Swiss Exchange The SIX Swiss Exchange is Switzerland’s principal
stock exchange and part of the Cash Markets Division of SIX Group. It
operates several trading platforms and is the marketplace for various types
of securities. The SIX Swiss Exchange is supervised by the Swiss Financial
Market Supervisory Authority (FINMA).
EDRs: Egyptian Depository Receipts
TRevPAR Total Revenue Per Available Room is similar to RevPAR but
also takes into account other room revenues e.g. food and beverage,
entertainment, laundry and other services.
EFSA: Egyptian Financial Supervisory Authority
UAE United Arab Emirates
EGX: The Egyptian Exchange is one of the oldest stock markets established
in The Middle East. The Egyptian Exchange traces its origins to 1883 when
the Alexandria Stock Exchange was established, followed by the Cairo Stock
Exchange in 1903.
UK United Kingdom
Group: Orascom Development Holding AG and its subsidiaries.
KPI: Key Performance Indicators are financial and non-financial metrics used to
help an organization define and measure progress toward organizational goals.
M2 Square meter
M3 Cubic meter
MBA The Master of Business Administration is a master’s degree in business
administration.
MCDR Misr for Central Clearing, Depository and Registry provides
securities settlement and custody services in Egypt by applying central
depository system, effect central registry of securities traded in the Egyptian
capital market and facilitate securities trading on dematerialized shares.
Design and Production by Icon Communications
www.designbyicon.com
www.orascomdh.com

FY 2013 Annual Report

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