RNS Number : 6548Z
ADES International Holding PLC
22 September 2020
 

For the purpose of the Transparency Directive the Home Member state of the issuer is the United Kingdom.

 

ADES International Holding PLC results for the six-month period ended 30 June 2020

 

(London & Dubai, 22 September 2020) ADES International Holding PLC ("ADES" or "the Group"), a leading oil & gas drilling and production services provider in the Middle East and North Africa (MENA), announces its results for the six-month period ended 30 June 2020.

 

Summary of Financials

(US$ '000)

H1 2020

H1 2019

% change

Revenue

249,325

219,940

13%

EBITDA

93,324

90,064

3.6%

EBITDA Margin

37.4%

40.9%

-3.5 pts

Normalised EBITDA1

99,906

 90,064

11%

Normalised EBITDA Margin

40.1%

40.9%

-0.8 pts

Net Profit

15,469

3,2352

378%

Net Profit Margin

6.0%

1.0%

5 pts

Normalised Net Profit3

25,989

32,844

-21%

Normalised Net Profit Margin

10.4%

14.9%

-4.5 pts

Weighted Average No. of Shares

43,223

43,794

-1.3%

Normalised Earnings per Share (US$)

0.60

0.75

-20%

Reported Earnings per Share (US$)

0.36

0.07

384%

Net Debt

621

601

3.3%

 

Key Financial Highlights

·    Revenue grew by 13.4% to US$ 249.3 million in H1 2020 from US$ 219.9 million in the same period of 2019, demonstrating the Group's resilience in the face of exceptional challenges posed by the outbreak of COVID-19 and fluctuating oil prices.

·    EBITDA increased by 3.6% to US$ 93.3 million in H1 2020 from US$ 90.1 million in H1 2019. EBITDA margin stood at 37.4% versus 40.9% in H1 2019. The EBITDA margin in H1 2020 was impacted by one-off charges taken to ensure continued safe operation of the crews across the Group's rigs during the ongoing COVID-19 crisis, in addition to non-recurring integration costs.

·    Normalised EBITDA1, which excludes one-off charges, was up 11.0% year-on-year to US$ 99.9 million in H1 2020, with a margin of 40.1%.

·    Backlog as at 30 June 2020 of US$ 1.2 billion, compared to US$ 1.3 billion at year-end 2019, reflecting delivery of c.US$ 250 million and replenishment with three new contracts worth US$ 140 million.

·    Net profit of US$ 15.5 million in H1 2020 compared to US$ 3.2 million in the same period during 2019, due to a 40% year-on-year reduction in the reported interest expense.

·    Normalised net profit3 stood at US$ 26.0 million in H1 2020, compared to US$ 32.8 million for the same period in 2019. The decline was due to a higher depreciation expense due to the Group's increased asset base. Additionally, the Group booked higher finance charges in H1 2020 on a normalised basis as a consequence of the successful issuance of the Group's five-year bond of US$ 325 million in late April 2019 and utilisation of the US$ 80 million NCB facility during H2 2019, both of which provided additional liquidity, headroom and financial flexibility for the business.

·    Net operating cashflow recorded a strong 66% y-o-y growth to US$ 102 million in H1 2020, which was reflected on the Group's free cash flow to firm FCFF (pre debt service) having stood at an inflow of US$ 37 million compared to an outflow of US$ 115 million in the same period last year. The improvement follows a normalisation of capital expenditure post acquisitions and the significantly enhanced working capital dynamics year over year, specifically following a temporary increase at the end of Q1 2020 as the Group took proactive efforts to secure essential supplies and inventory in order to mitigate any potential disruptions related to COVID-19. Additionally, the Group saw improved collection periods, particularly in KSA and Kuwait, coupled with tighter cash preservation policies.

·    Cash on hand of US$ 125.6 million and available undrawn banking facilities of approximately US$ 90 million as at 30 June 2020, continuing to provide strong liquidity and headroom.

·    Net Debt stood at US$ 621 million as of 30 June 2020 versus US$ 640.3 million as of 31 March 2020. The improvement is in line with the guidance stated in the Q1 2020 trading update (in June) where management had anticipated a normalisation of working capital requirements.

·    Net Debt to LTM EBITDA4 stood at 3.16x in H1 2020, providing headroom against the current covenant of 4.0x.

·    B+ credit rating reaffirmed by S&P and Fitch Ratings during the first half of 2020.

·    Utilisation rates softened from 95% to 92% in H1 2020 despite the year-on-year improvement recorded in Q1 2020 as market conditions impacted Q2. Expectation for 2H 2020 to slightly lag behind the first half of the year.  

·  Contract renewals and extensions for US$ 140 million in KSA, including a five-year contract renewal for ADMARINE 262, a one-year extension for ADMARINE 261 and a six-month contract extension for ADES 40.

·   Launch of a second share repurchase program emphasising the Board's confidence in the Company's prospect. Thus far, the Company has purchased 2.46 million treasury shares worth approximately US$ 24.2 million as of 31 August 2020, in turn channelling cash back to shareholders.

·    ADES achieved over 6.75 million-man hours in H1 2020 with a Recordable Injury Frequency Rate ("RIFR") of 0.415, below the IADC worldwide standard rate as at 30 June 2020 of 0.52.

 

 1Normalised EBITDA is calculated as EBITDA excluding non-recurring charges related to: a) non-recurring staff cost related to crew overstay due to COVID 19; b) non-recurring integration program costs.

2 Refer to the financial statement as 30 June 2020, disclosure 3 Business combination.

3 Normalised Net Profit is calculated as net profit before non-controlling interest after excluding non-recurring charges from: a) non-recurring staff cost related to crew overstay due to COVID 19; b) non-recurring integration program costs;  c) one off finance charges related to loan fees and written off prepaid transaction costs; d) accounting adjustments related to IFRS 3 (Business Combinations) and a one-off bargain purchase gain; e) non-cash, equity-settled share-based payment compensation from the parent company; f) non-cash fair-value adjustments under financial instruments; and g) non-recurring transactions.

4 LTM EBITDA (Last Twelve Months EBITDA) is calculated as operating profit for the period before depreciation and amortisation, employee benefit provision and other provisions and impairment of assets under construction for the past twelve consecutive months.

5 Per 200,000 working hours

 

Key Operational Highlights

·    The Group's proactive response at the onset of the COVID-19 crisis saw the roll out of robust health and safety protocols and business continuity plans to mitigate risks posed by the pandemic. These protocols have proven successful in allowing the Group's operations to continue without notable interruptions across all four of its countries of operation.

·    With the vast majority of the Group's rigs staffed by in country employees, the restrictions on mobility, which impacted businesses globally, have not posed significant challenges to ADES's operations. The Group also benefits from the essential role of the oil & gas industry for the MENA region, which is seen as an important factor in helping to address some of the restrictive measures imposed by governments across the region on other industries. Additionally, the MENA region continues to produce a significant proportion of global supply at low production costs per barrel.

·  The Group's continued focus on business sustainability over the years, allowed ADES to enter 2020 well positioned to weather the current challenging conditions faced up to this point as well as any future difficulties which may present. Today ADES's business has been largely shielded from the ongoing turmoil.

 

Current Trading and Outlook

·    During the first six months of the year, ADES continued to make good progress with its Integration Project and is now delivering normalised EBITDA margins broadly in line with the Group's average at the majority of the Group's acquired rigs. Furthermore, the Group was agile in implementing cost-saving initiatives, in its effort to counter the effect posed by the pandemic and the current market dynamics.

·    Despite the challenges posed by the ongoing COVID-19 pandemic and the oil prices fluctuations, the Group's operations have not seen a material impact with the exception of the delay of two new contracts in Kuwait (previously announced on 9 December 2019)  and temporary contract suspensions for few of the Group's land rigs due to the slowdown of activities in KSA and Algeria. 

·    The contract suspensions helped our client control their costs while at the same time generally preserving ADES's backlog with the suspension period automatically extending the contracted tenor. More importantly, we were able to almost eliminate our costs for these rigs, which in addition to the low-cost nature of stacking onshore rigs has allowed the Group to broadly maintain margins. This flexibility has further strengthened our client partnerships, leaving them satisfied with quality assets on temporary hold and ensuring our ability to a swift return to production without the need for retendering.

·    In the second half of 2020, the Group expects to continue delivering resilient operational and financial results but lagging behind figures recorded in the first six months of the year. Overall, as previously highlighted, management expects full-year results broadly in line with the Group's 2019 performance underpinned by the current backlog and activity levels.

 

Commenting on the results, Dr. Mohamed Farouk, Chief Executive Officer of ADES International said: 

"The Group's first half results highlight the relative resilience of ADES's markets and the strength of our business model in very challenging market conditions. This in part reflects the Group's successful transformation over the last three years from a local, offshore-focused driller in Egypt, to a regional champion with a significant asset base across both the on- and offshore segments. Over the same period ADES has significantly grown revenue and delivered a threefold increase in EBITDA, strengthening its financial position. I am proud to say that regardless of the ongoing global uncertainty, the whole team has demonstrated tremendous commitment, and remarkable agility which enabled us to continue working in line with our strategy.

 

Our results were supported by a strong first quarter performance through April, before seeing an impact caused by oil market volatility and COVID-19 related disruptions towards the end of the second quarter. Nevertheless, we managed to broadly maintain our normalised margins thanks to our cost-saving initiatives that helped counter the effect posed by the pandemic and the current market dynamics.

 

In the medium term we see good prospects for our services given our geographical exposure and cost-effective, well targeted asset base. We do expect an oil market recovery through 2021 as the global economy slowly recovers and markets return to an equilibrium. 

 

Having successfully navigated the most critical time in the global crisis, the Board is confident in ADES's ability to continue to prosper with strong long-term sustainable business."

 

 

 

Conference Call

ADES's management team will host an analyst and investor call for the 1H 2020 Results today at 14:00 UK. For conference call details, please email ades@instinctif.com.

 

 

ADES International Holding

Hussein Badawy

Investor Relations Officer

ir@adesgroup.com

+2 (02) 38525354

 

About ADES International Holding (ADES)

ADES International Holding extends oil and gas drilling and production services through its subsidiaries and is a leading service provider in the Middle East and North Africa, offering onshore and offshore contract drilling as well as workover and production services. Its c.4,000 employees serve clients including major national oil companies ("NOCs") such as Saudi Aramco and Kuwait Oil Company as well as joint ventures of NOCs with global majors including BP and Eni. While maintaining a superior health, safety and environmental record, the Group currently has a fleet of thirty-six onshore drilling rigs, thirteen jack-up offshore drilling rigs, a jack-up barge, and a mobile offshore production unit ("MOPU"), which includes a floating storage and offloading unit. For more information, visit investors.adihgroup.com.

 

Shareholder Information

LSE: ADES INT.HDG

Bloomberg: ADES:LN

Listed: May 2017

Shares Outstanding: 43.8 million

 

Forward-Looking Statements

This communication contains certain forward-looking statements. A forward-looking statement is any statement that does not relate to historical facts and events, and can be identified by the use of such words and phrases as "according to estimates", "aims", "anticipates", "assumes", "believes", "could", "estimates", "expects", "forecasts", "intends", "is of the opinion", "may", "plans", "potential", "predicts", "projects", "should", "to the knowledge of", "will", "would" or, in each case their negatives or other similar expressions, which are intended to identify a statement as forward-looking. This applies, in particular, to statements containing information on future financial results, plans, or expectations regarding business and management, future growth or profitability and general economic and regulatory conditions and other matters affecting the Group.

 

Forward-looking statements reflect the current views of the Group's management ("Management") on future events, which are based on the assumptions of the Management and involve known and unknown risks, uncertainties and other factors that may cause the Group's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. The occurrence or non-occurrence of an assumption could cause the Group's actual financial condition and results of operations to differ materially from, or fail to meet expectations expressed or implied by, such forward-looking statements.

 

The Group's business is subject to a number of risks and uncertainties that could also cause a forward-looking statement, estimate or prediction to differ materially from those expressed or implied by the forward-looking statements contained in this prospectus. The information, opinions and forward-looking statements contained in this communication speak only as at its date and are subject to change without notice. The Group does not undertake any obligation to review, update, confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of this communication.

 

 

Operational & Financial Review

 

Backlog 

The Group's backlog recorded US$ 1.2 billion as at 30 June 2020 compared to US $1.3 billion at 31 December 2019, as the adverse market conditions due to COVID-19 and oil price volatility presented for reduced tendering and renewal activity. Nonetheless ADES added c. US$ 140 million of backlog during H1 2020.

 

In H1 2020, in the KSA, ADMARINE 262 secured a contract renewal for an additional five years at a higher day rate, while for ADMARINE 261 the contract was extended for an additional year at the same day rate. Additionally, the Group also secured a six-month contract extension for ADES 40 which is also located in KSA.  

 

Revenue

Revenue grew 13.4% year-on-year in H1 2020 representing Group's ability to promptly adapt to the difficult operational conditions, combined with the resilience of its business model which saw ADES record only a marginal decline in utilisation rates to 92% from 95% in H1 2019. The decline is attributable to a slowdown of activities in the second quarter of the year.

 

 

Revenue by Country

 (US$ '000)

H1 2020

 

H1 2019

% change

KSA

 135,090

 

121,008

11.6%

Kuwait

 65,737

 

39,057

68.3%

Egypt

 39,167

 

43,571

-10.1%

Algeria

 9,331

 

16,304

-42.8%

Total

 249,325

 

 219,940

13.4%

 

Revenue Contribution by Country

 

 

 

 

H1 2020

H1 2019

% change

KSA

54%

55%

-1 pts

Kuwait

26%

18%

8 pts

Egypt

16%

20%

-4 pts

Algeria

4%

7%

-3 pts

             

 

Backlog by Country

 

 

 

 

H1 2020

H1 2019

% change

KSA

51%

50%

+1 pts

Egypt

8%

10%

-2 pts

Algeria

2%

2%

-

Kuwait

39%

38%

+1 pts

             

 

The Group's revenue in KSA rose 11.6% year-on-year to US$ 135.1 million in the first half of 2020. While fluctuations in the oil price and the ongoing COVID-19 crisis impacted operations across the region, the long-term planning horizons and lower breakeven point of ADES's main partner in KSA, Saudi Aramco, allowed the Company to continue operating without major in-country disruptions. Specifically, growth was driven by the new build rigs ADES 13 and ADES 14 that were not operational in H1 2019. Additionally, operations in KSA recorded a modest improvement in average utilisation rates of offshore rigs, with two rigs having undergone upgrade projects for approximately 30 days in H1 2019 versus full operation in the current period.

 

In Kuwait, the continued ramp up of operations in the country saw first half revenue expand 68.3% year-on-year to US$ 65.7 million. As such, the country's contribution to consolidated revenue increased eight percentage points to 26% in H1 2020. Revenue growth in Kuwait came as the number of operating rigs increased year-on-year.

 

Revenue from Egypt of US$ 39.2 million was down 10.1% year-on-year. The country's contribution to total revenues stood at 16% in H1 2020. Operations in the country were impacted by oil price volatility and generally adverse market conditions.

 

Algeria revenue declined to US$ 9.3 million in H1 2020, down 42.8% versus the same period of last year. The decline is largely attributable to lower utilisation rates given a lower oil price. Algeria is our most exposed end market to oil price volatility and as a result of the weak first half performance Algeria's contribution to consolidated revenue declined to 4% compared to 7% in the first half of 2019.

 

Assets by Country & Type as at 30 June 2020

 

Onshore Rig

Offshore Rig

Jack-up Barge

MOPU

KSA

15

6

-

-

Kuwait

12

-

-

 

Egypt

1

7

1

1

Algeria

8

-

-

-

Other

-

-

-

                           -

Total Assets

36

13

1

1

 

Revenue by Segment

(US$ '000)

H1 2020

H1 2019

% change

Onshore Drilling & Workover

 134,186

 109,820

22.2%

Offshore Drilling & Workover

 88,896

 85,364

4.1%

MOPU

 12,899

12,810

0.7%

Jack Up Barge & Projects

 1,144

6,123

-81.3%

Others

 12,200

5,823

109.5%

Total

 249,325

 219,940

13.4%

 

Onshore Drilling & Workover (54% of revenue in H1 2020)

ADES's onshore fleet currently includes 36 rigs located in KSA, Kuwait, Algeria and one in Egypt. The Company's onshore capabilities have been significantly expanded in recent years through the acquisition of 31 onshore rigs during 2018 and 2019, and in H1 2020 made up more than half of the Group's revenue at 54%. H1 2020 revenue generated by ADES's Onshore Drilling & Workover operations grew 22.2% year-on-year to US$ 134.2 million. Onshore growth was driven by contracts for ADES 13 and ADES 14 in KSA as well as the increase in the number of operating rigs in Kuwait year on year.

 

Offshore Drilling & Workover (36% of revenue in H1 2020)

We currently conduct our offshore drilling and workover services in Egypt and KSA, focusing on shallow/ultra-shallow water and non-harsh environments.

Offshore Drilling & Workover revenue saw a 4.1% year-on-year increase to US$ 88.9 million in H1 2020, up from US$ 85.4 million in the same period of 2019. The segment's contribution to the Group's consolidated revenues declined three percentage points to 36%, reflecting the rapid growth in contribution from the onshore segment. Revenue growth was driven by a marginal improvement in offshore utilisation rates in KSA, with two rigs having undergone upgrade projects during H1 2019.

 

MOPU, Jack Up Barge & projects (5% of revenue in H1 2020)

ADES's MOPU services were first introduced in February 2016 with Admarine I, a converted and modified jack-up rig equipped with production and process facilities and a Floating Storage and Offloading (FSO) unit. Admarine I, located in Egypt, is currently under contract with Petrozenima to process, store and offload crude oil.

 

MOPU services generated revenues of US$ 12.9 million in H1 2020, largely unchanged from the same six months of 2019.

 

The Group's jack-up barge and projects generated US$ 1.1 million in revenue for H1 2020 compared to US$ 6.1 million in H1 2019. The decline reflects slower activity of projects in Egypt which accounted for c.US$ 3.9 million of the lower revenue year-on-year.

 

Others (5% of revenue in H1 2020)

Other revenue mainly includes catering, mobilization, the rental of essential operating equipment that the client has not supplied, and site preparation revenue. Other revenue recorded a 109.5% year-on-year increase to US$ 12.2 million in H1 2020 from US$ 5.8 million in the same period of last year. The significant increase is largely attributable to mobilization revenue amortization for four rigs in H1 2020 as opposed to two rigs in H1 2019; and de-mobilization revenue for four rigs in Kuwait (out of which two are being prepared for new contracts).

 

Operating Profit

Operating profit was US$ 57.5 million in H1 2020, remaining largely flat compared to the US$ 57.9 million recorded in the same period last year.

 

Normalised EBITDA - which excludes non-recurring staff costs related to crew overstays due to COVID-19 (US$ 3.3 million) mainly during Q2 2020 and non-recurring integration program costs (US$ 3.3 million) was up 11.0% year-on-year to US$ 99.9 million in H1 2020, a margin of 40.1% versus 40.9% in H1 2019. The modest contraction in margin reflects the mix effect of the growing contribution from onshore drilling and workover activities in KSA and Kuwait.

 

Net Finance Charges

Reported finance charges stood at US$ 31.5 million in H1 2020, down 40% year-on-year from the US$ 52.7 million in H1 2019. The decline reflects the one-offs in H1 2019 related to the successful issuance of the Group's five-year bond, loan fees and written-off prepaid transaction costs.

 

Normalised net finance charges which exclude one-off costs increased by 14% year-on-year versus US$ 27.6 million in H1 2019. Higher finance charges reflect higher gross borrowings as facilities were secured in order to provide an optimal capital structure, with the required financial flexibility and liquidity. The Group received finance income of US$ 0.5 million in H1 2020 compared to US$ 0.1 million in H1 2019.

 

Statutory and Normalised Net Profit

 

ADES reported a net profit of US$ 15.5 million in H1 2020, up 378% from the US$ 3.2 million recorded in H1 2019. Normalised net profit was down by 21% at US $26.0 million, excluding the following non-recurring charges:

 

·    non-cash, equity-settled share-based payment compensation from the Parent Company of US$ 1.9 million;

·    non-cash fair-value adjustment loss under financial instruments of US$ 2.0 million;

·    one-off charges related to COVID-19 and non-recurring integration program costs totalling US$ 6.6 million.

 

Balance Sheet

 

Assets

Total assets stood at US$ 1.45 billion as of 30 June 2020 compared to US$ 1.43 billion as of 31 December 2019, representing a modest 1% increase. Net fixed assets were US$ 1.01 billion at H1 2020 compared to US$ 987 million at the 2019 year-end, driven by the refurbishment and maintenance capital expenditure during the period above depreciation.

 

Net accounts receivable stood at US$ 130.6 million as of 30 June 2020, flat compared to year-end 2019. 

 

Cash and cash equivalents increased to US$ 125.6 million compared to US$ 119.6 million at year-end 2019.

 

Liabilities

ADES' total liabilities stood at US$ 995.4 million as of 30 June 2020 compared to US$ 978.8 million as of 31 December 2019. The Group's total interest-bearing loans, borrowings and financial lease were US$ 747.1 million as of 30 June 2020, up from US$ 725.8 million at the end of 2019.

 

Net debt was US$ 621 million as of 30 June 2020, down from US$ 640 million at the close of the previous quarter and higher than the US$ 606 million as of 31 December 2019. The quarter-on-quarter improvement in net debt reflects a normalisation of working capital requirements following an increase in the first quarter of the year as the Group took proactive efforts to secure essential supplies and inventory in order to mitigate any potential disruptions related to COVID-19.

 

Cash Flow

 

Cash Flow by Activity

(US$ '000)

H1 2020

H1 2019

% change

Net Cash Flow from Operating Activities

101,965

61,177

67%

Net Cash Flow Used in Investing Activities

(63,986)

(176,759)

-64%

Net Cash Flow from Financing Activities

(31,976)

24,661

n/a

 

Cash Flow from Operating Activities

Cash flow from operating activities increased 67% year-on-year to US$ 102 million in H1 2020 driven by improved operational performance along with better working capital dynamics. The Group saw improved collection periods, particularly in KSA and Kuwait, coupled with tighter cash preservation policies.

 

 

Net Cash Flow Used in Investing Activities

Net cash flow used in investing activities declined 64% year-on-year to US$ 64.0 million in H1 2020 compared to the US$ 176.8 million in the same period last year. The decline reflects the higher total spend in H1 2019 including the acquisition spend for the Algerian and South Iraqi land rigs from Weatherford; capital expenditure to build two new-build land rigs for KSA; and spending to ongoing upgrades on ADES's rigs. Meanwhile, capital expenditure in H1 2020 totalled US$ 64.4 million.

 

Net Cash Flow from Financing Activities

Net cash outflow from financing activities stood at US$ 32 million in H1 2020 compared to an inflow of US$ 24.7 million in the same period last year. The change reflects repayments of US$ 46 million related to the Group's medium-term loans and other revolving or working capital facilities; US$ 30.2 million in interest payments; and US$ 14.3 million for the purchase of treasury stock. The Group drew down on the remainder of its Alinma facility totalling US$ 64.0 million during 2Q 2020 as part of our capital structure optimisation efforts.

 

The Group has a total loan repayment of approximately US$ 40 million in H2 2020 which will be satisfied through existing cash balances.

 

 

Principal Risks and Uncertainties

 

As any company, ADES is exposed to risks and uncertainties that may adversely affect its performance. The Board and senior management agree that the principal risks and uncertainties facing the Group include political and economic situation in Egypt, Algeria, Kuwait and KSA and the rest of the Middle East and North Africa region, foreign currency supply and associated risks, changes in regulation and regulatory actions, environmental and occupational hazards, failure to maintain the Group's high quality standards and accreditations, failure to retain or renew contracts with clients, failure to recruit and retain skilled personnel and senior management, pricing pressures and decreased business activity in the oil and gas industry, among others.

 

Additionally, the continued spread of the global COVID-19 pandemic and the potential for a second wave across the Group's geographies as well as uncertainty in commodity markets continues to affect the global economic outlook and in turn activity in oil markets. This may adversely impact future financial results, earnings and cash flow for all businesses including ADES. The Group is also exposed to specific risks posed by the COVID-19 pandemic, including, but not limited to, risk of infection among its employees, operational disruption in the case of infection on the Group's rigs, supply-chain related risks and the ability to acquire necessary materials and failure to mobilise crew due to travel restrictions and lockdowns.

 

Going Concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, the Directors continue to adopt the going concern basis in preparing the condensed financial statements. The Group's Financial Statements for the half year ended 30 June 2020 are available on the Group's website at investors.adihgroup.com

 

 

Statement of Directors' Responsibilities

 

Each of the Directors confirms that, to the best of their knowledge:

·    The preliminary financial information, which has been prepared in accordance with International Financial Reporting Standards ("IFRS"), give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and

·    The preliminary announcement includes a fair summary of the development and performance of the business and the position of the Group.

After making enquiries, the Directors considered it appropriate to adopt the going concern basis in preparing the consolidated financial statements.

 

A list of current directors of the Company is maintained on the Group's website at investors.adihgroup.com.

 

On behalf of the Board

Dr. Mohamed Farouk

Chief Executive Officer

 

 

Terms and Definitions

 

EBITDA - Operating profit for the year before depreciation and amortisation, employee benefit provision and other provisions and impairment of assets under construction.

 

Normalised EBITDA - EBITDA excluding non-recurring charges related to: a) non-recurring staff cost related to crew overstay due to COVID 19; and b) non-recurring integration program costs.

 

LTM EBITDA (Last Twelve Months EBITDA) - operating profit for the period before depreciation and amortisation, employee benefit provision and other provisions and impairment of assets under construction for the past twelve consecutive months.

 

Normalised Net profit - Net profit before non-controlling interest after excluding non-recurring charges from: a) non-recurring staff cost related to crew overstay due to COVID 19; b) non-recurring integration program costs;  c) one off finance charges related to loan fees and written off prepaid transaction costs; d) accounting adjustments related to IFRS 3 (Business Combinations) and a one-off bargain purchase gain; e) non-cash, equity-settled share-based payment compensation from the parent company; f) non-cash fair-value adjustments under financial instruments; and g) non-recurring transactions costs.

 

FCFF (pre debt service) - Free Cash Flow to Firm calculated as cash flow from operations (after working capital changes) less taxes paid, less CAPEX.

 

Backlog - means the total amount payable to the Group during the remaining term of an existing contract plus any optional client extension provided for in such contract, assuming the contracted rig will operate (and thus receive an operating day rate) for all calendar days both in the remaining term and in the optional extension period.

 

GCC - Gulf Cooperation Council.

 

MENA - The Middle East and North Africa.

 

MOPU - Mobile Operating Production Unit.

 

Recordable Injury Frequency Rate (RIFR) - The number of fatalities, lost time injuries, cases or substitute work and other injuries requiring medical treatment by a medical professional per 200,000 working hours.

 

KSA -The Kingdom of Saudi Arabia.

 

Utilisation Rate - refers to our measure of the extent to which our assets under contract and available in the operational area are generating revenue under client contracts. We calculate our utilisation rate for each rig by dividing Utilisation Days by Potential Utilisation days under a contract. Utilisation rates are principally dependent on our ability to maintain the relevant equipment in working order and our ability to obtain replacement and other spare parts. Because our measure of utilisation does not include rigs that are stacked or being refurbished or mobilised, our reported utilisation rate does not reflect the overall utilisation of our fleet, only of our operational, contracted rigs.

 

Gross Debt - Total interest-bearing loans and borrowings.

 

Net Debt - Total gross debt minus cash and cash equivalents.

 

 

 

 

 

 

 

 

 

ADES International Holding PLC

and its Subsidiaries

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

30 June 2020

 

 

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS TO THE SHAREHOLDERS OF ADES INTERNATIONAL HOLDING PLC AND ITS SUBSIDIARIES

 

 

Introduction

We have reviewed the accompanying interim condensed consolidated statement of financial position of ADES International Holding plc (the "Company") and its subsidiaries (the "Group") as of 30 June 2020 and the related interim condensed consolidated statements of comprehensive income, changes in equity and cash flows for the six-months period then ended, and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with International Accounting Standard 34 Interim Financial Reporting ("IAS 34"). Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.

 

For Ernst & Young

 

 

 

Signed by:

Anthony O'Sullivan

Partner

 

 

17 September 2020

 

Dubai, United Arab Emirates

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the six months period ended 30 June 2020 (Unaudited)

 

 

US$

Notes

30 June 2020

 

30 June 2019 (Restated*)

 

 

 

 

 

Revenue from contract with customers

5

          249,325,240

 

          219,940,465

Cost of revenue

6

         (158,039,578)

 

         (128,857,424)

GROSS PROFIT

 

            91,285,662

 

            91,083,041

 

 

 

 

 

General and administrative expenses

7

           (26,573,446)

 

           (23,992,501)

End of service provision

20

             (2,550,346)

 

             (1,745,191)

Share-based payments expense

22

             (1,922,935)

 

             (7,470,824)

Inventory impairment provision

11

                (220,331)

 

 -     

Provision for impairment of trade receivables and contract assets

12

             (2,558,649)

 

 -     

OPERATING PROFIT

 

            57,459,955

 

            57,874,525

 

 

 

 

 

Finance costs

8

           (31,545,379)

 

           (52,676,090)

Finance income

10

                 481,305

 

                 123,982

Bargain purchase gain

3

 -     

 

            11,877,674

Business acquisition transaction costs

3

 -     

 

             (4,383,022)

Capital loss from assets disposal

14

                (333,176)

 

 -     

Other income

 

 -     

 

                 378,203

Other taxes

 

                (237,098)

 

                  (80,250)

Other expenses

 

             (2,311,347)

 

             (1,093,385)

Fair value loss on derivative financial instrument

27

             (2,014,982)

 

             (4,552,297)

PROFIT FOR THE PERIOD BEFORE INCOME TAX

 

            21,499,278

 

              7,469,340

 

 

 

 

 

Income tax expense

9

             (6,030,643)

 

             (4,234,025)

PROFIT FOR THE PERIOD

 

            15,468,635

 

              3,235,315

 

 

 

 

 

OTHER COMPREHENSIVE INCOME

 

 -     

 

 -     

TOTAL COMPREHENSIVE INCOME

 

            15,468,635

 

              3,235,315

Attributable to:

 

 

 

 

  Equity holders of the Parent

 

            13,998,082

 

              2,205,550

  Non-controlling interests

 

              1,470,553

 

              1,029,765

 

 

            15,468,635

 

              3,235,315

 

 

 

 

 

Earnings per share - basic and diluted attributable to equity holders of the Parent (US$ per share)

23

                       0.32

 

                       0.05

 

 

 

 

 

OTHER COMPREHENSIVE INCOME

Other comprehensive income that may be reclassified to

profit or loss in subsequent periods (net of any tax)

 

 

 

 

 

Net loss on cash flow hedge

27

             (2,810,994)

 

 -     

OTHER COMPREHENSIVE LOSS FOR THE PERIOD, NET OF TAX

 

             (2,810,994)

 

 -     

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX

 

            12,657,641

 

              3,235,315

Attributable to:

 

 

 

 

  Equity holders of the Parent

 

            11,187,088

 

              2,205,550

  Non-controlling interests

 

              1,470,553

 

              1,029,765

 

 

            12,657,641

 

              3,235,315

 

 

*Comparative information has been adjusted to reflect the IFRS 3 Business combination measurement period adjustments, refer to note 3.

The accompanying notes 1 to 30 form an integral part of these consolidated financial statements.

 

 

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION at 30 June 2020 (Unaudited)

 

US$

Notes

30 June 2020

 

31 December 2019

 

 

 

 

 

ASSETS

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

14

1,006,663,328

 

987,216,314

Right of use assets

17

21,777,732

 

23,422,290

Intangible assets

15

364,346

 

347,304

Investments in an associate and a joint venture

 

3,968,008

 

4,140,576

Trade receivables

12

16,754,965

 

38,947,290

Other non-current assets

 

1,130,559

 

2,858,310

Total non-current assets

 

1,050,658,938

 

1,056,932,084

 

 

 

 

 

Current assets

 

 

 

 

Inventories

11

47,984,109

 

44,820,164

Trade receivables

12

113,813,826

 

91,780,792

Contract assets

12

34,234,563

 

41,541,310

Due from related parties

24

4,080,399

 

4,740,918

Prepayments and other receivables

13

69,207,724

 

72,150,555

Bank balances and cash

10

125,604,127

 

119,601,159

Total current assets

 

394,924,748

 

374,634,898

Total assets

 

1,445,583,686

 

1,431,566,982

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

Equity

 

 

 

 

Share capital

21

43,793,882

 

43,793,882

Share premium

21

178,746,337

 

178,746,337

Merger reserve

 

(6,520,807)

 

(6,520,807)

Legal reserve

 

6,400,000

 

6,400,000

Share-based payments reserve

 

13,264,154

 

11,341,219

Treasury shares

 

(18,285,402)

 

(3,501,200)

Cash flow hedge reserve

 

(8,958,569)

 

(6,147,575)

Retained earnings

 

233,223,501

 

219,225,419

Equity attributable to equity holders of the Parent

 

441,663,096

 

443,337,275

Non-controlling interests

 

8,551,656

 

9,387,205

Total equity

 

450,214,752

 

452,724,480

 

 

 

 

 

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Interest-bearing loans and borrowings

18

341,251,756

 

322,354,493

Bonds payable

19

314,291,958

 

313,158,968

Lease liabilities

17

13,359,957

 

13,316,152

Provisions

20

17,840,957

 

16,375,652

Derivative financial instrument

27

9,093,581

 

6,584,893

Deferred mobilisation revenue

 

13,449,660

 

11,751,262

Other non-current payables

 

10,331,565

 

10,988,839

Total non-current liabilities

 

719,619,434

 

694,530,259

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

16

185,850,756

 

196,329,456

Interest-bearing loans and borrowings

18

84,214,117

 

83,692,835

Provisions

20

177,390

 

1,100,000

Due to related parties

24

58,221

 

58,224

Derivative financial instrument

27

5,449,016

 

3,131,728

Total current liabilities

 

275,749,500

 

284,312,243

Total liabilities

 

995,368,934

 

978,842,502

TOTAL EQUITY AND LIABILITIES

 

1,445,583,686

 

1,431,566,982

 

The accompanying notes 1 to 30 form an integral part of these consolidated financial statements.

 

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months period ended 30 June 2020 (Unaudited)

 

US$

Share capital

Share premium

Merger reserve

Legal reserve

Share-based payment reserve

Cash flow hedge reserve

Treasury shares

Retained earnings

Total

Non-controlling interests

Total

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2020

43,793,882

178,746,337

(6,520,807)

6,400,000

11,341,219

(6,147,575)

 (3,501,200)

219,225,419

443,337,275

9,387,205

452,724,480

Dividends (Note 28)

 -     

 -     

 -     

 -     

 -     

 -     

 -     

 -     

 -     

(2,306,102)

 (2,306,102)

Profit for the period

 -     

 -     

 -     

 -     

 -     

 -     

 -     

13,998,082

13,998,082

1,470,553

15,468,635

Other comprehensive loss for the period

 -     

 -     

 -     

 -     

 -     

(2,810,994)

 -     

 -     

 (2,810,994)

 -     

 (2,810,994)

Total comprehensive income for the period

 -     

 -     

 -     

 -     

 -     

(2,810,994)

 -     

13,998,082

11,187,088

1,470,553

12,657,641

Treasury Shares (Note 21)

 -     

 -     

 -     

 -     

 -     

 -     

(14,784,202)

 -     

(14,784,202)

 -     

(14,784,202)

Share-based payments (Note 22)

 -     

 -     

 -     

 -     

1,922,935

 -     

 -     

 -     

1,922,935

 -     

1,922,935

Balance at 30 June 2020

43,793,882

178,746,337

(6,520,807)

6,400,000

13,264,154

(8,958,569)

(18,285,402)

233,223,501

441,663,096

8,551,656

450,214,752

 

US$

Share capital

Share premium

Merger reserve

Legal reserve

Share-based payment reserve

Retained earnings

Total

Non-controlling interests

Total

Equity

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2019

43,793,882

178,746,337

(6,520,807)

6,400,000

 -     

191,115,161

413,534,573

8,987,787

422,522,360

Profit for the period, restated*

 -     

 -     

 -     

 -     

 -     

2,205,550

2,205,550

1,029,765

3,235,315

Other comprehensive income for the period

 -     

 -     

 -     

 -     

 -     

 -     

 -     

 -     

 -     

Total comprehensive income for the period, restated*

 -     

 -     

 -     

 -     

 -     

2,205,550

2,205,550

1,029,765

3,235,315

Share-based payments

 -     

 -     

 -     

 -     

7,470,824

 -     

7,470,824

 -     

7,470,824

Balance at 30 June 2019

43,793,882

178,746,337

(6,520,807)

6,400,000

7,470,824

193,320,711

423,210,947

10,017,552

433,228,499

 

*Comparative information has been adjusted to reflect the IFRS 3 Business combination measurement period adjustments, refer to note 3.

The accompanying notes 1 to 30 form an integral part of these consolidated financial statements.

 

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months period ended 30 June 2020 (Unaudited)

 

US$

Notes

30 June 2020

 

30 June 2019 (Restated*)

 

 

 

 

 

OPERATING ACTIVITIES

 

 

 

 

Profit for the period before income tax

 

         21,499,278

 

             7,469,340

Adjustments for:

 

 

 

 

  Depreciation of property, plant and equipment

14

         28,425,621

 

           20,244,491

  Amortisation of intangible assets

15

                68,683

 

                  59,297

  Depreciation of right of use assets

17

           2,676,188

 

             2,669,341

  Provision for impairment of trade receivables and contract assets

12

           2,558,649

 

 -     

  End of services provision

20

           2,550,346

 

             1,745,191

  Share-based payments expense

22

           1,922,935

 

             7,470,824

  Inventory impairment provision

11

              220,331

 

 -     

  Capital loss from assets disposal

14

              333,176

 

 -     

  Finance costs

8

         31,545,379

 

           52,676,090

  Finance income

10

            (481,305)

 

              (123,982)

  Bargain purchase gain

3

 -     

 

         (11,877,674)

  Share of results of investment in a joint venture and an associate

 

              172,568

 

                211,209

  Fair value loss on derivative financial instrument

27

           2,014,982

 

             4,552,299

Cash from operations before working capital changes

 

         93,506,831

 

           85,096,426

 

 

 

 

 

Inventories

 

         (3,384,276)

 

           (1,380,625)

Trade receivables

 

                  2,254

 

         (44,411,798)

Contract assets

 

           7,306,747

 

             1,022,331

Due from related parties

 

              660,519

 

           (2,626,296)

Prepayments and other receivables

 

           4,902,901

 

         (25,990,149)

Trade and other payables

 

           4,846,779

 

           52,464,763

Due to related parties

 

                       (3)

 

                    2,119

Cash flows from operations

 

       107,841,752

 

           64,176,771

Income tax paid

 

         (3,869,280)

 

           (2,279,508)

Provisions paid

20

         (2,007,651)

 

              (360,481)

Net cash flows from operating activities

 

       101,964,821

 

           61,536,782

INVESTING ACTIVITIES

 

 

 

 

Purchase of intangible assets

15

              (23,250)

 

 -     

Purchase of property, plant and equipment

 

       (64,444,163)

 

       (100,155,423)

Acquisitions of subsidiaries and new rigs

 

 -     

 

         (76,237,278)

Interest received

 

              481,305

 

                123,982

Investment in an associate

 

 -     

 

              (490,000)

Net cash flows used in investing activities

 

       (63,986,108)

 

       (176,758,719)

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

Proceeds from interest-bearing loans and borrowings

 

         64,000,000

 

           85,585,672

Repayment of interest-bearing loans and borrowings

 

       (46,132,450)

 

       (337,900,000)

Proceeds from bonds issuance

19

 -     

 

         325,000,000

Payments of loan/bonds transaction costs

 

 -     

 

         (12,941,008)

Interest paid

 

       (30,175,949)

 

         (31,688,558)

Treasury shares acquired

 

       (14,271,474)

 

 -     

Dividend payments

28

         (2,306,102)

 

 -     

Payment of lease liabilities

17

         (3,089,770)

 

           (3,395,099)

Net cash flows from financing activities

 

       (31,975,745)

 

           24,661,007

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

           6,002,968

 

         (90,560,930)

Cash and cash equivalents at the beginning of the period

10

       119,601,159

 

         130,875,239

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD

 

 

10

       125,604,127

 

           40,314,309

*Comparative information has been adjusted to reflect the IFRS 3 Business combination measurement period adjustments, refer to note 3.

 

The accompanying notes 1 to 30 form an integral part of these consolidated financial statements.

 

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS at 30 June 2020 (Unaudited)

 

1          BACKGROUND

 

Corporate information

ADES International Holding PLC (the "Company" or the "Parent") was incorporated and registered in the Dubai International Financial Centre (DIFC) on 22 May 2016 with registered number 2175 under the Companies Law - DIFC Law No. 2 of 2009 (and any regulations thereunder) as a private company limited by shares. The Company's shares are listed on the Main Market of the London Stock Exchange. The Company's registered office is at level 5, Index tower, Dubai International Financial Centre, PO Box 507118, Dubai, United Arab Emirates. The principal business activity of the Company is to act as a holding company and managing office. The Company and its subsidiaries (see below) constitute the Group (the "Group"). The Company is owned by ADES Investments Holding Ltd., a company incorporated on 22 May 2016 under the Companies Law, DIFC Law no. 2 of 2009, which is the majority shareholder and ultimate controlling party.

 

These interim condensed consolidated financial statements have been approved by the Board of Directors on 17 September 2020.

 

The Group is a leading oil and gas drilling and production services provider in the Middle East and Africa. The Group services primarily include offshore and onshore contract drilling and production services. The Group currently operates in Egypt, Algeria, Kuwait and the Kingdom of Saudi Arabia. The Group's offshore services include drilling and workover services and Mobile Offshore Production Unit (MOPU) production services, as well as accommodation, catering and other barge-based support services. The Group's onshore services primarily encompass drilling and work over services. The Group also provides projects services (outsourcing various operating projects for clients, such as maintenance and repair services).

 

The interim condensed consolidated financial statements of the Group include activities of the following main subsidiaries:

 

Name

 

Principal activities

Country of incorporation

% equity interest

2020

2019

 

 

 

 

 

Advanced Energy Systems (ADES) (S.A.E)*

Oil and gas drilling and production services

 

Egypt

 

100%

 

100%

Precision Drilling Company**

Holding company

Cyprus

100%

100%

Kuwait Advanced Drilling Services

Leasing of rigs

Cayman

100%

100%

Prime innovations for Trade S.A.E

Trading

Egypt

100%

100%

ADES International for Drilling

Leasing of rigs

Cayman

100%

100%

ADES-GESCO Training Academy

Training

Egypt

70%

70%

Advanced Transport Services

Leasing of transportation equipment

 

Cayman

 

100%

 

100%

             

 

* Advanced Energy Systems (ADES) (S.A.E) has branches in the Kingdom of Saudi Arabia, Algeria, Abu Dhabi and Iraq.

 

** Precision Drilling Company holds 47.5% interest in United Precision Drilling Company W.L.L, a Kuwait entity which handles the operations of the rigs in Kuwait.

 

The Company holds an investment in Egyptian Chinese Drilling Company (ECDC) (joint venture) and ADVantage for Drilling Services Company (associate) which are accounted for using equity method of accounting in these interim condensed consolidated financial statements.

 

In 2016, pursuant to a reorganisation plan (the "Reorganisation") the ultimate shareholders of the Subsidiary:

 

(i) established the Company as a new holding company with share capital of USD 1,000,000 and made an additional capital contribution of USD 30,900,000 for additional shares that were allotted on 23 March 2019. No such reorganisations took place in 2020 and 2019.

 

(ii)  transferred their shareholdings in Advanced Energy System (ADES) (S.A.E.) to the Company for a total consideration of USD 38,520,807 comprising of cash of USD 29,710,961 and the assumption of shareholder obligation of USD 8,809,846.

 

2          SIGNIFICANT ACCOUNTING POLICIES

 

2.1       BASIS OF PREPARATION

The interim condensed consolidated financial statements of the Group for the six months period ended 30 June 2020 have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting.

 

The interim condensed consolidated financial statements have been prepared under the historical cost basis, except for derivative financial instruments carried at fair value which include interest rate swap contracts classified as held-for-trading and those designated as hedging instrument. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

 

The interim condensed consolidated financial statements are presented in United States Dollars ("USD"), which is the functional currency of the Parent Company and the presentation currency for the Group.

 

The interim condensed consolidated financial statements do not contain all information and disclosures required for full financial statements prepared in accordance with International Financial Reporting Standards and should be read with the Group's annual financial statements as at 31 December 2019. The results for the period ended 30 June 2020 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2020.

 

Basis of consolidation

The interim condensed consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 June 2020. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

 

(a)    Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

(b)    Exposure, or rights, to variable returns from its involvement with the investee, and

(c)    The ability to use its power over the investee to affect its returns

 

Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

 

(a)    The contractual arrangement with the other vote holders of the investee

(b)    Rights arising from other contractual arrangements

(c)    The Group's voting rights and potential voting rights

 

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

 

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the consolidated financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Subsidiaries are fully consolidated from the date of acquisition or incorporation, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The Consolidated financial statements of the subsidiaries are prepared for the same reporting period as the Group, using consistent accounting policies.

 

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

-     Derecognises the assets (including goodwill) and liabilities of the subsidiary

-     Derecognises the carrying amount of any non-controlling interests

-     Derecognises the cumulative translation differences recorded in equity

-     Recognises the fair value of the consideration received

-     Recognises the fair value of any investment retained

-     Recognises any surplus or deficit in profit or loss

-     Reclassifies the parent's share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.

 

2.2       NEW STANDARDS AND INTERPRETATIONS

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2019, except for the adoption of new standards and interpretations as of 1 January 2020.

 

The following new standards and amendments became effective as at 1 January 2020, which did not have an impact on the interim condensed consolidated financial statements of the Group:

 

• Amendments to IFRS 3 Definition of a Business

• Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform

• Amendments to IAS 1 and IAS 8 Definition of Material

• Conceptual Framework for Financial Reporting

 

The Group did not early adopt any standard, interpretation or amendment that was issued but is not yet effective.

 

 

3          BUSINESS COMBINATIONS

 

As part of the Group's strategy to expand its fleet and operations, the Group has acquired the assets and entities which are accounted for as business combinations. These business combinations resulted in bargain purchase transactions because the fair value of assets acquired and liabilities assumed exceeded the total fair value of the consideration paid and the fair value of non- controlling interests.

 

Acquisitions of the rigs from Weatherford Drilling International- recorded in period ended 30 June 2019

On 27 February 2019 and 25 March 2019, the Group acquired certain assets from Weatherford Drilling International in Algeria and Iraq, respectively.  The acquisitions have been accounted for using the acquisition method.

 

The Group acquired 6 onshore rigs in Algeria and related equipment, drilling contracts, other vendor contracts, certain employees, spare parts to be used in the drilling business, the business intellectual property and records related to the drilling business. While in Iraq, the Group acquired 2 onshore rigs and related equipment, certain employees, spare parts to be used in the drilling business, the business intellectual property and records related to the drilling business.

 

Identifiable net assets acquired

The fair value of the identifiable assets and liabilities as at the acquisition were:

 

US$

Fair values recognized on acquisition (Algeria)

 

Fair values recognized on acquisition (Iraq)

Property, plant and equipment

          55,983,324

 

          17,200,000

Inventory

            8,553,595

 

 -     

Total identifiable net assets at fair value

       64,536,919

 

       17,200,000

Bargain purchase gain arising on acquisitions

          (6,677,674)

 

          (5,200,000)

Purchase considerations

       57,859,245

 

       12,000,000

 

 

 

 

Analysis of cash flow on acquisition (included in cash flows from investing activities)

 

 

 

Cash paid

          (60,000,000)

 

          (12,000,000)

Cash collected*

              2,140,755

 

 -     

Net cash out flows on acquisition

       (57,859,245)

 

       (12,000,000)

*The Group claimed and collected USD 2,140,755 from the Seller which represents a backlog deduction at the closing date for Algeria as per the terms of the Sales and Purchase Agreement signed between WDI and the Group.
 

Comparative Information

During the year ended 31 December 2019, the Group completed the necessary analysis on the fair values of assets and liabilities acquired in Algeria and Iraq, which resulted in decrease in the fair value of the assets acquired with the corresponding decrease in depreciation charge recorded as cost of revenue and in bargain purchase gain:

 

US$

As previously reported

30 June 2019

IFRS 3 Business Combination measurement period adjustment

Restated balances 30 June 2019

 

 

 

 

Consolidated statement of comprehensive income:

 

 

 

Cost of revenue

        (128,511,093)

       (346,331)

        (128,857,424)

Bargain purchase gain

            20,340,755

    (8,463,081)

            11,877,674

 

 

 

 

Consolidated statement of cash flow:

 

 

 

Profit for the period before income tax

            16,278,752

    (8,809,412)

              7,469,340

Depreciation of property, plant and equipment

            19,898,160

        346,331

            20,244,491

Bargain purchase gain

          (20,340,755)

     8,463,081

          (11,877,674)

 

 

 

4          SEGMENT INFORMATION

 

Management has determined the operating segments based on the reports reviewed by the Chief Executive Officer (CEO) that are used to make strategic decisions. As operationally, the Group is only in the oil and gas production and drilling services, the CEO considers the business from a geographic perspective and has identified five geographical segments (2019: five geographical segments). Management monitors the operating results of its segments separately for the purpose of making decisions about resource allocation and performance assessment.

 

Segment (US$)

Egypt

Algeria

KSA

Kuwait

United Arab Emirates****

Total segment

Adjustments and eliminations***

Total****

For the period ended 30 June 2020

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

External customers

39,166,679

9,331,460

135,090,438

65,736,663

 -     

249,325,240

 -     

249,325,240

Inter-segment

38,419,323

 -     

 -     

 -     

 -     

38,419,323

      (38,419,323)

 -     

Total Revenue

77,586,002

9,331,460

135,090,438

65,736,663

 -     

287,744,563

      (38,419,323)

249,325,240

Expenses

 

 

 

 

 

 

 

 

Cost of revenue*

(18,138,882)

 (7,060,598)

(71,251,486)

(30,768,448)

 -     

(127,219,414)

 -     

(127,219,414)

General and administrative expenses

 (2,242,855)

 (1,434,652)

(15,059,546)

 (4,702,915)

 (3,133,478)

 (26,573,446)

 -     

 (26,573,446)

Finance costs (net)

 (2,410,774)

 (1,261,222)

(18,081,743)

 (9,310,335)

 -     

 (31,064,074)

 -     

 (31,064,074)

Depreciation and amortisation

(12,372,887)

 (1,223,050)

(10,233,731)

 (6,990,496)

 -     

 (30,820,164)

 -     

 (30,820,164)

Other expenses (net)**

 (3,081,986)

 (499,014)

 (7,408,684)

 (2,077,278)

 (5,112,545)

 (18,179,507)

 -     

 (18,179,507)

Profit / (Loss)- excluding inter-segment revenue

919,295

 (2,147,076)

13,055,248

11,887,191

 (8,246,023)

15,468,635

 -     

15,468,635

Total Assets as at 30 June 2020 (i)

835,400,982

90,010,389

152,335,994

341,118,092

26,718,229

1,445,583,686

 -     

1,445,583,686

Total Liabilities as at 30 June 2020

411,518,795

12,590,439

67,286,648

76,851,407

427,121,645

994,368,934

 -     

995,368,934

Other Segment information (30 June 2020)

 

 

 

 

 

 

 

 

Capital expenditure (i)

20,481,580

46,581

15,373,774

12,366,351

 -     

48,268,286

 -     

48,268,286

Intangible assets expenditure

23,250

 -     

 -     

 -     

 -     

23,250

 -     

23,250

Total

20,504,830

46,581

15,373,774

12,366,351

 -     

48,291,536

 -     

48,291,536

 

 

 

 

 

 

 

 

 

 

 

 

4          SEGMENT INFORMATION (continued)

 

Segment (US$)

Egypt

Algeria

KSA

Kuwait

United Arab Emirates****

Total segment

Adjustments and eliminations***

Total****

For the year ended 30 June 2019

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

External customers

43,570,858

16,304,642

121,007,781

39,057,184

 -     

219,940,465

 -     

219,940,465

Inter-segment

41,852,822

 -     

 -     

 -     

 -     

41,852,822

      (41,852,822)

 -     

Net Revenue

85,423,680

16,304,642

121,007,781

39,057,184

 -     

261,793,287

      (41,852,822)

219,940,465

Expenses

 

 

 

 

 

 

 

 

Cost of revenue*

(17,763,339)

 (8,541,980)

(59,682,185)

(20,745,900)

 -     

 (106,733,404)

 -     

 (106,733,404)

General and administrative expenses

 (6,708,344)

 (1,183,065)

 (10,154,510)

 (3,835,052)

 (2,111,530)

 (23,992,501)

 -     

 (23,992,501)

Finance costs (net)

 (5,342,786)

 (2,045,718)

 (15,182,659)

 (4,900,444)

 (25,080,501)

 (52,552,108)

 -     

 (52,552,108)

Depreciation and amortisation

 (11,189,814)

 (4,150,058)

 (6,715,548)

 (68,600)

 -     

 (22,124,020)

 -     

 (22,124,020)

Other expenses (net)**

 (890,694)

 (170,055)

 (6,315,011)

 (1,339,497)

 (2,587,860)

 (11,303,117)

 -     

 (11,303,117)

Profit / (Loss)- excluding inter-segment revenue

1,675,881

213,766

22,957,868

8,167,691

 (29,779,891)

3,235,315

 -     

3,235,315

Total Assets as at 31 December 2019 (i)

863,562,100

98,630,862

108,650,199

346,575,615

14,148,206

1,431,566,982

 -     

1,431,566,982

Total Liabilities as at 31 December 2019

374,171,422

16,943,110

58,622,288

94,608,532

434,497,150

978,842,502

 -     

978,842,502

Other Segment information (30 June 2019)

 

 

 

 

 

 

 

 

Capital expenditure (i)

15,233,746

56,640,921

41,010,083

76,381,016

 -     

189,265,766

 -     

189,265,766

Intangible assets expenditure

 -     

 -     

 -     

 -     

 -     

 -     

 -     

 -     

Total

15,233,746

56,640,921

41,010,083

76,381,016

 -     

189,265,766

 -     

189,265,766

 

* excluding depreciation and amortisation.

** Other expenses includes end of service provision, provision for impairment of inventory, provision for impairment of trade receivables, share-based payments expense, business acquisition transaction costs, capital loss from asset disposal, other taxes, income tax expense and other expenses which are stated net off release of provision for impairment of trade receivables, bargain purchase gain, fair value gain/(loss) on derivative financial instrument and other income.

*** Inter-segment revenues and other adjustments are eliminated upon consolidation and reflected in the 'adjustments and eliminations' column.

**** The United Arab Emirates (UAE) is included in reports reviewed by CEO. While ADES does not have business activities in the UAE, ADES is participating in tendering activities and therefore management believes it has potential to generate revenue in the future.

(i) Management presents the assets in the segment which holds such assets, while the capital expenditure are presented in the segment where such assets are utilised.

 

 

5          REVENUE FROM CONTRACT WITH CUSTOMERS

 

US$

30 June 2020

 

30 June 2019

 

 

 

 

Units operations

241,519,942

 

210,160,097

Catering services

4,230,254

 

3,837,612

Projects income *

79,200

 

3,957,421

Others

3,495,844

 

1,985,335

 

249,325,240

 

219,940,465

 

*Projects income represents services relating to outsourcing various operating projects for clients such as manpower, well platform installation, maintenance and repair services.

 

The disaggregation of revenue in accordance with IFRS 15 is in line with the segments disclosed in Note 4 above as the management monitors the revenue geographically and the main operational revenue stream is drilling services (units operations) and the revenue is recognised over the time of service.

 

 

6          COST OF REVENUE

 

US$

30 June 2020

 

30 June 2019 (Restated*)

 

 

 

 

Staff costs**

62,116,891

 

45,051,645

Repair and maintenance costs

20,345,024

 

22,272,588

Depreciation

30,820,164

 

22,124,019

Rental equipment

5,292,564

 

2,962,979

Insurance

2,890,133

 

3,007,019

Project direct costs

1,333

 

2,088,268

Other costs

36,573,469

 

31,350,906

 

158,039,578

 

128,857,424

 

* The corresponding figures for 2019 have been adjusted to reflect the IFRS 3 Business combination measurement period adjustments as discussed in Note 3.

** It includes staff cost of USD 3,327,510 in relation to the overstay of the crew due to COVID 19 (30 June 2019: NIL)

 

7          GENERAL AND ADMINISTRATIVE EXPENSE

 

US$

30 June 2020

 

30 June 2019

 

 

 

 

Staff costs*

16,923,746

 

14,517,595

Depreciation and amortisation

350,328

 

849,110

Professional fees

2,083,262

 

1,393,764

Business travel expenses

1,091,235

 

1,325,402

Free zone expenses

2,069,474

 

1,875,515

Rental expenses

424,156

 

607,896

Other expenses

3,631,245

 

3,423,219

 

26,573,446

 

23,992,501

 

* It includes staff cost of USD 3,254,682 in relation to the integration project (30 June 2019: NIL) which is estimated based on the number of hours spent on the project.
 

8          FINANCE COSTS

 

US$

30 June 2020

 

30 June 2019

 

 

 

 

Loan interest expense

       11,727,045

 

            18,552,330

Loan fees and written off prepaid transaction cost

          2,202,099

 

            25,080,501

Bond interest and bond fees amortisation

       15,148,618

 

              5,139,064

Guarantee related finance charges

          1,568,293

 

              2,041,387

Interest on lease liabilities

             400,306

 

                 649,687

IRS related finance charges

          1,658,399

 

                 461,761

Interest on overdraft facilities

             840,602

 

                 321,270

Unwinding of discounting of a long-term trade receivable

        (2,152,932)

 

 -     

Other finance charges

             152,949

 

                 430,090

 

       31,545,379

 

            52,676,090

 

 

9          INCOME TAX

 

US$

30 June 2020

 

30 June 2019

 

 

 

 

Consolidated statement of profit or loss:

 

 

 

Current income tax expense*

6,030,643

 

4,234,025

 

 

 

 

 

*Current income tax expense includes withholding taxes on intercompany rentals in the Kingdom of Saudi Arabia amounting to USD 2,524,368  (30 June 2019: USD 2,118,101).

 

The Group operates in jurisdictions which are subject to tax at higher rates than the statutory corporate tax rate of 0%, which is applicable to profits in Algeria, Kingdom of Saudi Arabia and Kuwait where applicable tax rate is 26%, 20% and 15%, respectively.

 

Egyptian corporations are normally subject to corporate income tax at a statutory rate of 22.5% however the Company has been registered in a Free Zone in Alexandria under the Investment Law No 8 of 1997 which allows exemption from corporate income tax.

 

 

10        BANK BALANCES AND CASH

 

US$

30 June 2020

 

31 December 2019

 

 

 

 

 

 

Cash on hand

170,503

 

21,245

Bank balances

107,742,643

 

56,373,290

Time deposits

17,690,981

 

63,206,624

Cash and cash equivalents for the purpose of statement of cash flows

125,604,127

 

119,601,159

 

 

 

 

Bank balances and cash comprise of balances in the following currencies:

 

 

 

 

 

 

 

 

 

*United States Dollar (USD)

66,939,005

 

97,150,110

 

Saudi Riyal (SAR)

36,266,674

 

4,367,958

 

*Egyptian Pound (EGP)

10,042,470

 

3,879,327

 

United Arab Emirates Dirham (AED)

48

 

38

 

Great British Pound (GBP)

74

 

160

 

Euro (EUR)

1,303

 

883

 

Algerian Dinar (DZD)

853,725

 

1,377,837

 

Kuwaiti Dinar (KWD)

11,500,828

 

12,824,846

 

 

125,604,127

 

119,601,159

 

               

 

*Time deposits represent short-term investment. Time deposits have original maturities of less than 90 days and earns average interest of 2.3% per annum for USD time deposits and 9% per annum for EGP time deposits (2019: 3.5% per annum). The finance income reported in the consolidated statement of comprehensive income for the period ended 30 June 2020 amounted to USD 481,305 (2019: USD 123,982).

 

11        INVENTORIES

 

US$

30 June 2020

 

31 December 2019

Offshore rigs

21,874,755

 

19,818,133

Onshore rigs

8,654,836

 

8,295,669

Warehouse and yards

17,454,518

 

16,706,362

 

47,984,109

 

44,820,164

 

As at 30 June 2020, the inventories are stated net of provision for impairment of inventory of USD 473,660 (2019: 253,329).

 

12        TRADE RECEIVABLES AND CONTRACT ASSETS

 

Trade receivables

 

US$

30 June 2020

 

31 December 2019

 

 

 

 

Trade receivables

     135,295,561

 

        132,896,203

Provision for impairment in trade receivables

        (4,726,770)

 

          (2,168,121)

 

     130,568,791

 

        130,728,082

Maturing within 12 months

     113,813,826

 

          91,780,792

Maturing after 12 months

       16,754,965

 

          38,947,290

Balance as at 31 December

     130,568,791

 

        130,728,082

 

 

Trade receivables are non-interest bearing and are generally on 30 to 90 days terms, except for one customer which is recorded as non-current, after which trade receivables are considered to be past due. Unimpaired trade receivables are expected to be fully recoverable on the past experience. It is not the practice of the Group to obtain collateral over receivables and the vast majority are, therefore, unsecured.

 

Contract assets

As at 30 June 2020, the Group has contract assets of USD 34,234,563 (2019: 41,541,310).

 

The movement in the provision for impairment of trade receivables and contract assets is as follows:

 

US$

30 June 2020

 

31 December 2019

 

 

 

 

As at 1 January

          2,168,121

 

            4,944,373

Charge for the period

          2,558,649

 

 -     

Release for the period

 -     

 

          (2,776,252)

As at 30 June

          4,726,770

 

            2,168,121

 

As at 30 June, the aging analysis of un-impaired trade receivables is as follows:

 

 

 

 

 

Past due but not impaired

US$

Neither past due nor impaired

 

<30 days

 

30 - 60 days

 

61 - 90 days

 

>90 days

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

30 June 2020

99,996,240

 

7,389,894

 

5,273,555

 

2,690,056

 

15,219,046

 

130,568,791

31 December 2019

99,540,594

 

10,527,810

 

2,668,836

 

1,808,191

 

16,182,651

 

130,728,082

 

 

The largest portion of balances is from one customer of the Group, which is a partially government owned entity. In 2019 the Group signed a settlement agreement with the customer to settle all due balance and the management believes that the customer will be able to fulfil its obligations. The application of forward-looking information has no material impact on the ECL provision.

 

13        PREPAYMENTS AND OTHER RECEIVABLES

 

US$

30 June 2020

 

31 December 2019

 

 

 

 

Invoice retention

38,932,589

 

44,361,741

Margin LG

4,212,567

 

2,379,048

Advances to contractors and suppliers

11,569,180

 

12,018,430

Insurance with customers

5,833,657

 

3,979,741

Dividends receivable

1,225,000

 

1,225,000

Provision for impairment in dividends receivables

-245,000

 

-245,000

Other receivables

7,679,731

 

8,431,595

 

69,207,724

 

72,150,555

 

 

14        PROPERTY AND EQUIPMENT

US$

Rigs*

Furniture & Fixtures

Drilling pipes

Tools

Assets under
construction

IT Equipment

Motor Vehicles

Leasehold

Improvements

Total

Cost:

 

 

 

 

 

 

 

 

 

  As at 1 January 2020

986,786,882

1,513,178

15,696,517

42,724,619

79,914,429

956,580

249,765

           687,471

1,128,529,441

  Additions

10,900,840

180,975

2,350,370

3,304,252

31,328,515

167,334

36,000

 -     

48,268,286

  Retirement & Disposal

 -     

 (514,724)

 -     

 -     

 -     

 -     

 -     

         (162,413)

 (677,137)

  Reclassification

 (9,230,748)

 -     

 -     

9,230,748

 -     

 -     

 -     

 -     

 -     

  Transfers

1,037,684

 -     

 -     

581,403

 (1,715,048)

33,486

 -     

 (62,475)

  As at 30 June 2020

989,494,658

1,179,429

18,046,887

55,841,022

109,527,896

1,157,400

285,765

1,176,058,115

Accumulated depreciation and impairment:

 

 

 

 

 

 

 

 

 

  As of 1 January 2020

 (122,573,384)

 (595,198)

 (5,030,612)

(11,358,115)

 (765,291)

 (573,029)

 (220,905)

         (196,593)

(141,313,127)

  Retirement & Disposal

 -     

251,116

 -     

 -     

 -     

 -     

 -     

             92,845

343,961

  Depreciation for the period*

 (23,849,544)

 (76,250)

 (1,774,126)

 (2,568,448)

 -     

 (77,125)

 (18,385)

           (61,743)

 (28,425,621)

  As of 30 June 2020

     (146,422,928)

      (420,332)

 (6,804,738)

(13,926,563)

 (765,291)

 (650,154)

 (239,290)

(169,394,787)

Net book value:

 

 

 

 

 

 

 

 

 

  At 30 June 2020

843,071,730

759,097

11,242,149

41,914,459

108,762,605

507,246

46,475

         359,567

1,006,663,328

 

 

 

 

 

 

 

 

 

 

31 December 2019

 

 

 

 

 

 

 

 

 

Cost:

 

 

 

 

 

 

 

 

 

  As at 1 January 2019

645,604,819

1,188,005

13,137,229

30,586,817

124,673,795

777,987

249,765

           256,804

816,475,221

  Additions

13,231,608

219,577

461,069

6,420,413

218,467,321

47,137

 -     

             36,747

238,883,872

  Acquisitions through business combinations (Note 6)

42,378,439

 -     

 -     

 -     

30,804,885

 -     

 -     

 -     

73,183,324

  Transfers

285,572,016

105,596

2,098,219

5,717,389

 (294,018,596)

131,456

 -     

           393,920

 -     

  Transfer to intangible assets

 -     

 -     

 -     

 -     

 (12,976)

 -     

 -     

 -     

 (12,976)

  As at 31 December 2019

986,786,882

1,513,178

15,696,517

42,724,619

79,914,429

956,580

249,765

           687,471

1,128,529,441

Accumulated depreciation and impairment:

 

 

 

 

 

 

 

 

 

  As of 1 January 2019

 (82,370,839)

 (476,251)

 (3,268,635)

 (8,130,782)

 (765,291)

 (443,545)

 (184,137)

         (118,623)

 (95,758,103)

  Depreciation for the year

 (40,202,545)

 (118,947)

 (1,761,977)

 (3,227,333)

 -     

 (129,484)

 (36,768)

           (77,970)

 (45,555,024)

  As of 31December 2019

 (122,573,384)

 (595,198)

 (5,030,612)

(11,358,115)

 (765,291)

 (573,029)

 (220,905)

         (196,593)

(141,313,127)

Net book value:

 

 

 

 

 

 

 

 

 

  At 31 December 2019

864,213,498

917,980

10,665,905

31,366,504

79,149,138

383,551

28,860

           490,878

987,216,314

 

*Comparative information has been adjusted to reflect the IFRS 3 Business combination measurement period adjustments, refer to note 3.

 

 

14        PROPERTY AND EQUIPMENT (cont'd)

Depreciation charge is allocated as follows:

US$

30 June 2020

 

30 June 2019

Cost of revenue (Note 6)

30,820,164

 

22,124,019

General and administrative expenses (Note 7)

350,328

 

849,110

Total depreciation charge

31,170,492

 

22,973,129

 

Assets under construction

Assets under construction represent the amounts that are incurred for the purpose of upgrading and refurbishing property and equipment until it is ready to be used in the operation. Assets under construction will be transferred to 'Rigs' or 'Tools' of the property and equipment after completion. 

 

*Some of the rigs are pledged to the lenders (banks) against loans and borrowings (Note 18).

 

 

15        INTANGIBLE ASSETS

US$

30 June 2020

 

31 December 2019

 

 

 

 

Cost:

 

 

 

  As at 1 January

             789,629

 

               776,653

  Additions

               23,250

 

 -     

  Transfer from property & equipment

               62,475

 

                 12,976

  As at period/ year end

             875,354

 

               789,629

Accumulated amortisation:

 

 

 

  As at 1 January

             442,325

 

               320,464

  Amortisation charge for the period/ year

               68,683

 

               121,861

  As at period/ year end

             511,008

 

               442,325

Net carrying amount:

 

 

 

  As at period/ year end

             364,346

 

               347,304

 

Intangible assets represent computer software and the related licenses.

 

16        TRADE AND OTHER PAYABLES

US$

30 June 2020

 

31 December 2019

 

 

 

 

Local trade payables

84,764,890

 

89,670,226

Foreign trade payables

21,398,077

 

24,930,548

Notes payable

2,680,633

 

2,371,597

Accrued expenses

35,467,691

 

41,035,747

Accrued interests

10,288,073

 

9,560,653

Income tax payable (Note 9)

12,369,615

 

9,975,938

Finance lease liability (Note17)

6,525,893

 

8,793,910

Other payables

12,355,884

 

9,990,837

 

185,850,756

 

196,329,456

 

 

 

17        LEASES

(US$)

Yard and Warehouse

Office Premises

Motor Vehicles

Other Equipment

Furniture and Fixture

Building

Total

Cost:

 

 

 

 

 

 

 

  As at 1 January 2020

4,829,127

1,105,574

1,915,524

12,332,234

1,357,312

7,230,880

28,770,651

  Additions

3,383

 -     

 (217,562)

 -     

925,160

320,649

1,031,630

  As at 30 June 2020

4,832,510

1,105,574

1,697,962

12,332,234

2,282,472

7,551,529

29,802,281

Accumulated depreciation:

 

 

 

 

 

 

 

  As at 1 January 2020

(1,224,677)

 (256,292)

 (678,170)

 (3,189,222)

 -     

 -     

(5,348,361)

  Depreciation

 (659,218)

 (128,026)

 (285,129)

 (1,572,350)

 -     

 (31,465)

(2,676,188)

  As at 30 June 2020

(1,883,895)

 (384,318)

 (963,299)

 (4,761,572)

 -     

 (31,465)

(8,024,549)

Net book value:

 

 

 

 

 

 

 

  As at 30 June 2020

2,948,615

721,256

734,663

7,570,662

2,282,472

7,520,064

21,777,732

 

(US$)

Yard and Warehouse

Office Premises

Motor Vehicles

Other Equipment

Building

Total

 

 

 

 

 

 

 

As at 1 January 2019

3,251,013

1,105,574

1,915,524

12,332,234

6,622,148

25,226,493

  Additions

1,578,114

 -     

 -     

 -     

1,966,044

3,544,158

  Depreciation

 (1,224,677)

 (256,292)

 (678,170)

 (3,189,222)

 -     

 (5,348,361)

As at 31 December 2019

3,604,450

849,282

1,237,354

9,143,012

8,588,192

23,422,290

 

Set out below are the carrying amounts of lease liabilities and the movements during the year:

 

US$

30 June 2020

 

31 December 2019

 

 

 

 

As at 1 January 2020

       22,110,062

 

          24,769,237

Additions

             501,991

 

            2,909,853

Accretion of interest

             363,567

 

            1,376,722

Payments

        (3,089,770)

 

          (6,945,750)

As at 30 June 2020

       19,885,850

 

       22,110,062

Current

          6,525,893

 

            8,793,910

Non-Current

       13,359,957

 

          13,316,152

 

18        INTEREST-BEARING LOANS AND BORROWINGS

 

US$

30 June 2020

 

31 December 2019

 

 

 

 

Balance as at 1 January

     406,047,328

 

        555,268,918

Borrowings drawn during the period/year

       64,000,000

 

        179,493,220

Borrowings repaid during the period/year

      (46,132,450)

 

      (351,018,420)

Amortised arrangement fees

          1,550,995

 

          22,303,610

Balance as at 30 June

     425,465,873

 

        406,047,328

Maturing within 12 months

       84,214,117

 

          83,692,835

Maturing after 12 months

     341,251,756

 

        322,354,493

Balance as at 30 June

     425,465,873

 

        406,047,328

 

 

 

Type

Interest rate %

Latest maturity

June

2020

USD

December

2019

USD

 

 

Current loans and borrowings

 

 

 

 

 

Loan 1 Syndication

 

 

 

 

Tranche A

5.0% + 6 Month LIBOR

3.5 years

15,050,000

15,050,000

 

 

 

 

 

-     

 

Ijara Loan

 

 

-     

-     

 

Tranche A

3.25% + 6 Months SAIBOR

7 years

12,727,273

15,554,000

 

Tranche B

3.25% + 6 Months SAIBOR

7 years

12,727,273

15,554,000

 

Tranche C

3.25% + 6 Months SAIBOR

7 years

14,545,455

8,888,000

 

Tranche D

3.25% + 6 Months SAIBOR

7 years

12,800,000

-

 

 

 

 

 

 

 

NCB Loan

 

 

 

 

 

NCB Loan

2.25%+SAIBOR

6 years

12,307,693

6,153,846

 

 

 

 

 

 

 

Credit facility 1

1.25% + Corridor

Renewable

(166)

(177)

 

Credit facility 2

4.50% + 3 Month LIBOR

Renewable

4,056,697

3,996,693

 

Credit facility 3

6.50% + 3 Month LIBOR

Renewable

-     

3,551,531

 

Credit facility 4

4% + 3 Month LIBOR

Renewable

(108)

111,609

 

Credit facility 5

2% + 6 Month LIBOR

Renewable

-     

5,333,333

 

RCF

3.5% + 3 Month LIBOR

Renewable

-     

9,500,000

 

 

 

 

──────────

──────────

 

Total current loans and borrowings

 

84,214,117

83,692,835

 

 

 

══════════

══════════

 

                     

 

Type

Interest rate %

Latest maturity

June

2020

USD

December

2019

USD

 

Non-current loans and borrowings

 

 

 

 

Loan 1 Syndication

 

 

 

 

Tranche A

5.0% + 6 Month LIBOR

3.5 years

35,506,900

42,178,475

 

Tranche B

5.0% + 6 Month LIBOR

3.5 years

30,000,000

30,000,000

 

 

 

 

 

 

 

NCB Loan

 

 

 

 

 

NCB Loan

2.25%+SAIBOR

6 years

67,475,260

73,594,207

 

 

Ijara loan

 

 

 

 

 

Tranche A

3.25% + 6 Months SAIBOR

7 years

47,978,687

51,023,811

 

Tranche B

3.25% + 6 Months SAIBOR

7 years

50,909,091

54,446,000

 

Tranche C

3.25% + 6 Months SAIBOR

7 years

58,181,818

71,112,000

 

Tranche D

3.25% + 6 Months SAIBOR

7 years

51,200,000

-     

 

 

 

──────────

──────────

 

Total non-current loans and borrowings

341,251,756

322,354,493

 

 

 

──────────

──────────

 

Total loans and borrowings

 

425,465,873

406,047,328

 

 

 

══════════

══════════

 

                     

 

The Group has secured loans and borrowings as follows:

 

Bank credit facilities

Credit facility 2 is granted by Industrial Development Bank of Egypt (IDBE) with an overdraft facility limit amounting to USD 4 million.

 

Credit facility 3 is granted by the Al Ahli Bank of Kuwait (ABK) with an overdraft facility limit amounting to USD 7 million.

 

Credit Facility 4 is granted by Export development Bank of Egypt (EBE) with a non-secured facility limit amounting to USD 12 million available for overdraft &/or Letters of Guarantees.           

 

Credit Facility 5 is granted by National Commercial Bank in KSA (NCB) with a total amount of SAR 30 million which is secured within a basket of other facilities.

 

Financial Institutions (as defined in the Revolving Credit Facility Agreement) made available a dollar revolving credit facility dated 18 April 2019 to ADES International Holding PLC, in the total principal amount of USD 50 million, which terms include extensions, renewals or increases (which may be made thereto from time to time).

 

Loan 1 - Syndication

On 2 May 2019, the Group has signed a syndication loan agreement arranged by HSBC with total amount of USD 100 million divided over four banks. The loan is divided into two tranches, the purpose and the use of each facility is described as follows:

 

a)   Tranche A

For refinancing existing financial indebtedness in full (excluding the payment of the fees, costs and expenses incurred under or in connection with the transaction documents). Tranche A was utilised during the current year to partially settle Loan 2 Tranch A.

 

b)   Tranche B

      Tranche B was utilised during the current year to partially settle Loan 2 Tranche B

 

Tranche A Facility is a medium-term loans over 3.5 years to be paid semi-annually in un-equal instalments starting from 22 September 2019 and the last instalment will be on 22 March 2023. Tranche B will be settled with bullet repayment on 22 March 2023.

 

Loan 2 - Syndication

On 22 March 2018, the Group has signed a syndication loan agreement arranged by Merrill Lynch International and EBRD with total amount of USD 450 million divided over eleven banks. The loan is divided into four tranches, the purpose and the use of each facility is described as follows:

 

a)   Tranche A

For refinancing existing financial indebtedness in full (including the payment of the fees, costs and expenses incurred under or in connection with the transaction documents). Tranche A was utilised in 2018 to settle financial indebtedness. On 2 May 2019, USD 130 million was settled in cash and USD 70 million was refinanced by Loan 1 Tranch A.

 

b)   Tranche B

      New working capital purposes and to refinance certain existing working capital facilities. Tranche B was utilised in 2018. On 2 May 2019, USD 11.5 million was settled in cash and USD 30 million was refinanced as discussed by Loan 1 Tranch B.

 

c)   Tranche C

      Capital expenditure for the acquisition of the new rigs and mobile offshore production units. Tranche C was partially utilised in 2018. On 2 May 2019, Tranche C was fully settled in cash.

 

d)   "Murabaha Facility"

Capital expenditure for the acquisition of the new rigs and mobile offshore production units. Murabaha Facility was partially utilised in 2018. On 2 May 2019, Murabaha Facility was fully settled in cash.

 

Ijara Loan

On 22 May 2018, the Group has signed "Musharakah" agreement and "Ijara" agreement with Alinma Bank to finance the acquisition of the new rigs and related capital expenditure with the amount of the equivalent to USD 140 million in SAR.

 

On 25 April 2019, the Group has signed "Musharakah" agreement and "Ijara" agreement with Alinma Bank to increase the facility to the equivalent to USD 284 million. On 20 May 2020, the group utilized equivalent to USD 64 million in SAR.

 

All loans are medium-term loans over 7 years which includes 2 year grace period and is paid semi-annually in equal instalments starting from 10 June 2020 and the last instalment will be on 10 June 2024.

 

Ijara loan is secured by the rigs purchased from Nabors Drilling International II Limited (Jackup rig Admarine 656, Jackup rig Admarine 656 and Jackup rig Admarine 657) and rigs purchased from Weatherford Drilling International (ADES 40, ADES 158, ADES 174, ADES 799 and ADES 889, Rig 144, Rig 798, Rig 157, Rig 173).

 

NCB Loan

On 14 May 2019, the group signed a Long Term Loan Facility agreement with National Commercial Bank ("NCB") for a total limit of SAR 300 million (USD 80 million). As of 31 December 2019, the Group has fully utilized the facility.

 

On 10 December 2019, the group has amended the facility with National Commercial Bank ("NCB") to be Sharia compliant (Islamic Facility) without any change in the original agreed terms.

 

The Group has secured interest-bearing loans and borrowings as follows:

 

Bank credit facilities

Credit facility 2 is granted by the Egyptian Gulf Bank (EGB) with an overdraft facility limit amounting to EGP 45,000,000 which is secured by promissory note.

 

Credit facility 3 is granted by the Al Ahli Bank of Kuwait (ABK) with an overdraft facility limit amounting to USD 7,000,000 which is secured by promissory note.

 

Loan 1 - Syndication

On 2 May 2019, the Group has signed a syndication loan agreement arranged by HSBC with total amount of USD 100 million divided over four banks. The loan is divided into two tranches, the purpose and the use of each facility is described as follows:

 

c)   Tranche A

For refinancing existing financial indebtedness in full (excluding the payment of the fees, costs and expenses incurred under or in connection with the transaction documents). Tranche A was utilised during the current year to partially settle Loan 2 Tranch A.

 

d)   Tranche B

      Tranche B was utilised during the current year to partially settle Loan 2 Tranche B

 

Tranche A Facility is a medium-term loans over 3.5 years to be paid semi-annually in un-equal instalments starting from 22 September 2019 and the last instalment will be on 22 March 2023. Tranche B will be settled with bullet repayment on 22 March 2023 

 

Loan 2 - Syndication

On 22 March 2018, the Group has signed a syndication loan agreement arranged by Merrill Lynch International and EBRD with total amount of USD 450 million divided over eleven banks. The loan is divided into four tranches, the purpose and the use of each facility is described as follows:

 

e)   Tranche A

For refinancing existing financial indebtedness in full (including the payment of the fees, costs and expenses incurred under or in connection with the transaction documents). Tranche A was utilised in 2018 to settle financial indebtedness. On 2 May 2019, USD 130 million was settled in cash and USD 70 million was refinanced by Loan 1 Tranch A.

 

f)    Tranche B

      New working capital purposes and to refinance certain existing working capital facilities. Tranche B was utilised in 2018. On 2 May 2019, USD 11.5 million was settled in cash and USD 30 million was refinanced as discussed by Loan 1 Tranch B.

 

g)   Tranche C

      Capital expenditure for the acquisition of the new rigs and mobile offshore production units. Tranche C was partially utilised in 2018. On 2 May 2019, Tranch C was fully settled in cash.

 

h)   "Murabaha Facility"

Capital expenditure for the acquisition of the new rigs and mobile offshore production units. Murabaha Facility was partially utilised in 2018. On 2 May 2019, Murabaha Facility was fully settled in cash.

 

Ijara Loan

On 22 May 2018, the Group has signed "Musharakah" agreement and "Ijara" agreement with Alinma Bank to finance the acquisition of the new rigs and related capital expenditure. The Musharakah facility amount is USD 200 million, of which 70% is financed by Alinma Bank and 30% by the Group. On 11 June 2018, the Group obtained USD 70 million from Alinma Bank within the framework of "Musharakah" facility to finance the acquisition of three rigs from Nabors (Note 5) and subsequent capital expenditures.

 

On 18 July 2018, the Group obtained USD 70 million from Alinma Bank within the framework of "Musharakah" facility to finance the acquisitions of three rigs from Weatherford Drilling International (Note 5).

 

On 25 April 2019 , the Group has signed "Musharakah" agreement and "Ijara" agreement with Alinma Bank to increase the facility to USD 284 million .On 5 May 2019, the Group obtained additional USD 80 million from Alinma Bank within the framework of "Musharakah" facility to finance the purchase and maintenance of rigs ADM 657, Rig 40, Rig 158, Rig 174, Rig 799 and Rig 889 .

 

All loans are medium-term loans over 7 years which includes 2 year grace period and is paid semi-annually in equal instalments starting from 10 June 2020 and the last instalment will be on 10 June 2024.

 

Ijara loan is secured by the rigs purchased from Nabors Drilling International II Limited (Jackup rig Admarine 656, Jackup rig Admarine 656 and Jackup rig Admarine 657) and rigs purchased from Weatherford Drilling International (ADES 40, ADES 158, ADES 174, ADES 799 and ADES 889) (Note 5).

 

Others

On 14 May 2019, the group signed a Long Term Loan Facility from National Commercial Bank ("NCB") for a total limit of SAR 300 million (US$80 million). As of 30 June 2019, the Group has not utilized any amounts under this facility.

 

On 6 May 2019, the group signed a multicurrency credit facility agreement with Mashreq Bank PJSC Dubai and subsequent amendments last of which being on 12 June 2019 for the total facility granted by Mashreq Bank PSC Dubai to reach $70,000,000. As of 30 June 2019, the Group has not utilized any amounts under this facility.

 

 

19        BONDS PAYABLE

 

On 16 April 2019, the Group issued USD 325,000,000 senior secured notes at 8.625% interest due on 24 April 2024. Interest is payable semi-annually on 24 April and 24 October each year commencing on 24 October 2019. The Group paid USD 10,708,042 as transaction costs for the issuance of the bonds. The Group recognised interest expense of USD 15,148,618 for the six months period ended 30 June 2020. The bonds payable is recognised at amortised cost using the effective interest method.

 

 

20        PROVISIONS

 

US$

As at

1 January

 

*Accrued / acquired during

the period/year

 

Paid during

the period/year

 

As at

period/year end

30 June 2020

 

 

 

 

 

 

 

Provision for end of service benefits

16,375,652

 

2,550,346

 

(1,085,041)

 

17,840,957

Other tax provisions *

1,100,000

 

-    

 

(922,610)

 

177,390

 

17,475,652

 

2,550,346

 

(2,007,651)

 

18,018,347

31 December 2019

 

 

 

 

 

 

 

Provision for end of service benefits

12,959,590

 

4,899,967

 

 (1,483,905)

 

16,375,652

Other tax provisions*

1,874,654

 

1,443,181

 

(2,217,835)

 

1,100,000

 

14,834,244

 

6,343,148

 

(3,701,740)

 

17,475,652

 

* Other tax provisions mainly represent provision made for employee's taxes and withholding taxes which are borne by the Group. The total balance is presented as current in the statement of financial position.

 

 

 

 

21        SHARE CAPITAL

 

Share capital of the Group comprise:

 

US$

 

 

30 June 2020

 

31 December 2019

 

 

 

 

 

 

Authorised shares*

 

 

1,500,000,000

 

1,500,000,000

Issued shares

 

 

43,793,882

 

43,793,882

Shares par value

 

 

1.00

 

1.00

Issued and paid up capital

 

 

43,793,882

 

43,793,882

Share premium**

 

 

178,746,337

 

178,746,337

 

 

 

 

 

 

 

 

 

 

 

 

The shareholding structure as at 30 June 2020 is:

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholding %

 

No. of

 

Value

Shareholders

 

 

shares

 

US$

 

 

 

 

 

 

ADES Investment Holding Ltd       

61

 

26,889,499

 

26,889,499

Individual shareholders       

39

 

16,904,383

 

16,904,383

 

100

 

43,793,882

 

43,793,882

 

The shareholding structure as at 31 December 2019 was:

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholding %

 

No. of

 

Value

Shareholders

 

 

shares

 

US$

 

 

 

 

 

 

ADES Investment Holding Ltd       

62

 

27,179,084

 

27,179,084

Individual shareholders       

38

 

16,614,798

 

16,614,798

 

100

 

43,793,882

 

43,793,882

 

*As at 30 June 2020 and 31 December 2019, the authorised share capital of the Company was USD 1,500,000,000 comprising of 1,500,000,000 shares.

 

** Share premium represents the excess of fair value received over the par value of shares issued as a result of business combinations and IPO.

 

Movement in treasury shares as at 30 June 2020 is as follows:

 

 

 

Shares issued

Treasury shares*

Shares outstanding

 

 

 

 

 

1 January 2020

Balance at beginning of year

43,793,882

300,000

43,493,882

 

 

 

 

 

 

Purchase of treasury shares

-     

1,542,591

1,542,591

 

 

 

 

 

30 June 2020

Balance at period end

43,793,882

1,842,591

41,951,291

 

Movement in treasury shares as at 31 December 2019 is as follows:

 

 

 

Shares issued

Treasury shares*

Shares outstanding

 

 

 

 

 

1 January 2019

Balance at beginning of year

43,793,882

-     

43,793,882

 

 

 

 

 

 

Purchase of treasury shares for cash

-     

300,000

300,000

 

 

 

 

 

31 December 2019

Balance at year end

43,793,882

300,000

43,493,882

 

* On 29 November 2019 the Group announced that pursuant to Shareholders' authority granted at the Company's EGM on 30 October 2019, it intends to commence purchases of ordinary shares in the capital of the Company. As at 30 June 2020 the total number of purchased ordinary shares that are held as treasury shares is 1,842,591 purchased for a cumulative amount of USD 18,275,089.

 

22        EQUITY SETTLED SHARE-BASED PAYMENTS

 

Pursuant to the rules of the Long Term Incentive Plan ("LTIP") adopted by ADES Investments Holding Ltd., the awards over a total number of 1,136,451 ordinary shares of US$1.00 each in the capital of the Company have been granted to certain employees of the Company by ADES Investments Holding Ltd (the majority shareholder). The LTIP is equity settled and effective from 1 January 2020. According to the LTIP rules, the shares will be vested over a period of three years and not subject to performance conditions. These shares are currently held by ADES Investments Holding Ltd and the awards will not be satisfied by the new issue of any shares in the Company. Awards will normally lapse and cease to vest on termination of employment.

 

The fair value at grant date was determined based on the market price of the shares of the Company at grant date.

 

For the six months ended 30 June 2020, the Group has recognised USD 1,922,935 of share-based payment expense in the consolidated statement of profit or loss (30 June 2019: USD 7,470,824), with a corresponding increase in equity (share-based payment reserve).

 

23        EARNINGS PER SHARE

 

Basic earnings per share (EPS) amounts are calculated by dividing the profit for the year attributable to the ordinary equity holders of the Parent by the weighted average number of ordinary shares outstanding during the year.

 

Diluted EPS is calculated by adjusting the weighted average number of ordinary shares outstanding assuming conversion of all dilutive potential ordinary shares. As at 30 June 2020, there were no potential dilutive shares and hence the basic and diluted EPS is same.

 

The information necessary to calculate basic and diluted earnings per share is as follows:

 

US$

30 June 2020

 

30 June 2019 (restated*)

 

 

 

 

Profit attributable to the ordinary equity holders of the Parent for

  basic and diluted EPS

13,998,082 

 

2,205,548

Weighted average number of ordinary shares -

 

 

 

  basic and diluted

43,222,712

 

43,793,882

Earnings per share - basic and diluted (US$ per share)

0.32

 

0.05

 

*Comparative information has been adjusted to reflect the IFRS 3 Business combination measurement period adjustments, refer to note 3.

 

24        RELATED PARTIES TRANSACTIONS AND BALANCES

 

Related party transactions

During the period, the following were the significant related party transactions recorded in the interim condensed consolidated statement of comprehensive income or consolidated statement of financial position:

 

Due from balance with AMAK for Drilling & Petroleum Services Co. (a related party under common control) relates to the funds transferred for settlement of payables to purchase fixed assets.

 

Related party balances

Significant related party balances included in the consolidated statement of financial position are as follows:

 

 

30 June 2020

31 December 2019

US$

Due from

 

Due to

 

Due from

 

Due to

 

 

 

 

 

 

 

 

Ultimate Shareholders

 

 

 

 

 

 

 

  Sky Investment Holding Ltd.

60,000

 

-    

 

60,000

 

-    

  Intro Investment Holding Ltd.

90,503

 

-    

 

90,503

 

-    

 

 

 

 

 

 

 

 

Shareholder

 

 

 

 

 

 

 

  ADES Investment Holding Ltd

114,864

 

-    

 

48,864

 

 

 

 

 

 

 

 

 

 

Joint venture

 

 

 

 

 

 

 

  Egyptian Chinese Drilling Co. (S.A.E.)

-

 

57,192

 

-

 

57,192    

 

 

 

 

 

 

 

 

Entities under common control

 

 

 

 

 

 

 

AMAK for Drilling & Petroleum Services Co.

3,087,608

 

-

 

4,019,924

 

 

Intro for Trading & Contracting Co.

266,715

 

-

 

39,738

 

 

 

 

 

 

 

 

 

 

Other related parties

 

 

 

 

 

 

 

  TBS Holding

18,836

 

-    

 

35,387

 

-    

Misr El-Mahrousa

12,716

 

 

 

14,624

 

 

Advantage Drilling Services

422,550

 

 

 

425,271

 

 

  Advansys Project

1,308

 

-    

 

1,308

 

-    

  Advansys Holding

5,299

 

-    

 

5,299

 

-    

  ADVANSYS FOR ENG.SERV. & CONS

-     

 

1,029

 

-    

 

1,032

 

4,080,399

 

58,221

 

4,740,918

 

58,224

 

Compensation of key management personnel

The remuneration of key management personnel during the period was as follows:

 

US$

30 June 2020

 

30 June 2019

 

 

 

 

  Short-term benefits*

660,000

 

2,020,000

 

25        FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Financial instruments comprise financial assets and financial liabilities. Financial assets of the Group include bank balances and cash, trade receivables and contract assets, due from related parties and other receivables. Financial liabilities of the Group include trade payables, due to related parties, loans and borrowings, other payables and derivative financial instrument. The fair values of the financial assets and liabilities are not materially different from their carrying value unless stated otherwise.

 

 

 

26        CONTINGENT LIABILITIES

 

 

US$

30 June 2020

 

31 December 2019

 

 

 

 

 

 

 

 

Letter of guarantees

34,502,890

 

33,572,453

 

Contingent liabilities represent letters of guarantee issued in favour of General Authority for Investment, Petrobel Group, Egyptian General Petroleum Corporation, Petro Gulf of Suez, Suze Abu Zenima Petroleum Company (Petro Zenima) and Association Sonatrach - First Calgary Petroleum. The cover margin on such guarantees amounted to USD 5,343,121 (31 December 2019: USD 5,527,168).

 

 

27        FINANCIAL INSTRUMENTS

 

US$

30 June 2020

 

31 December 2019

 

 

 

 

Derivative held for trading

 

 

 

Interest rate swap

 

 

5,584,028

 

3,569,046

 

 

 

 

Total current

2,088,740

 

1,150,326

Total non-current

3,495,288

 

2,418,720

 

 

 

 

 

 

 

 

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

 

US$

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

30 June 2020

 

 

 

 

 

 

 

 

Derivative financial Instrument

 

 

 

 

 

 

 

 

Interest rate swap

(5,584,028)

 

-

 

(5,584,028)

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 December 2019

 

 

 

 

 

 

 

 

Derivative financial Instrument

 

 

 

 

 

 

 

 

Interest rate swap

(3,569,046)

 

-

 

(3,569,046)

 

-    

 

 

During the period ended 30 June 2020, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 at fair value measurements (31 December 2019: nil).

 

Interest rate swap derivatives relate to contracts taken out by the Group with other counterparties (mainly financial institutions) in which the Group either receives or pays a floating rate of interest, respectively, in return for paying or receiving a fixed rate of interest. The payment flows are usually netted against each other, with the difference being paid by one party to the other.

 

Derivative financial instruments - classified as held for trading financial liabilities - are carried in the consolidated statement of financial position at fair value at the total of USD 5,584,028 as of 30 June 2020. The carrying amount of these derivatives represents the negative mark to market value of the remaining USD 100,000,000 notional amount of the swap contract that was originally entered into by the Group with Goldman Sachs (GS) in 2018, novated in 2019 and is still outstanding at 30 June 2020. The remaining tenor of the GS interest rate swap contract extends from 21 November 2019 until it terminates on 22 March 2023. The total notional amount of the GS interest rate swap before novation was USD 241,500,000 which represented at that time the loans withdrawn as Tranche A and B Loan under Loan 1 Syndication and Ijara loan (note 18).

 

 

US$

30 June 2020

 

31 December 2019

 

 

 

 

Derivative financial liabilities that are designed and effective as hedging instruments

 

 

 

Interest rate swap contracts

 

Balance as at 31 December

8,958,569

 

6,147,575

 

 

 

 

Total current

3,360,276

 

1,981,402

Total non-current

5,598,293

 

4,166,173

 

 

 

 

 

 

 

 

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

 

US$

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

30 June 2020

 

 

 

 

 

 

 

 

Derivative financial Instrument

 

 

 

 

 

 

 

 

Interest rate swap

(8,958,569)

 

-

 

(8,958,569)

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 December 2019

 

 

 

 

 

 

 

 

Derivative financial Instrument

 

 

 

 

 

 

 

 

Interest rate swap

(6,147,575)

 

-

 

(6,147,575)

 

-    

 

 

 

During the year ended 31 December 2019, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 at fair value measurements. (31 December 2018: Nil).

 

28     DIVIDEND DISTRIBUTIONS

 

In the current period, dividends of USD 2,306,102 (2019: USD 1,934,284) have been paid by UPDC, one of the Group's subsidiaries, to its non-controlling shareholders in respect of 2019 profits. The Board of Directors of ADES International Holding Plc does not propose a dividend to the shareholders at the Annual General Meeting.

 

29     SUBSEQUENT EVENTS

 

Shares buy back

As at 17 September, 2020, ADES International Holding PLC has purchased 616,292 from its own shares with an average price of USD 10.00 per share, in accordance with the shareholder authority granted at the Company's EGM on 22 June 2020 and as part of the buyback program announced on November 29, 2019. As at the close of business on 21 August 2020, the total number of ordinary shares held as treasury shares became 2,458,883 and ADES had 43,793,882 ordinary shares (including treasury shares) in issue. Therefore, the total number of voting rights in the Company became 43,423,882.

 

30     COVID-19 IMPACT

 

Current events caused by COVID-19 and lower oil prices

The outbreak of Novel Coronavirus (COVID-19) continues to progress and evolve. Therefore, it is challenging now, to predict the full extent and duration of its business and economic impact.

 

The extent and duration of such impacts remain uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the transmission rate of the coronavirus and the extent and effectiveness of containment actions taken. These developments could impact our future financial results, cash flows and financial condition.

 

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