Directors’ Report for the year ended 31st March, 2017

Dear Shareholders,

On behalf of the Board of Directors, I have great pleasure in welcoming you to the Twenty Second Annual General Meeting of Al Anwar Holdings SAOG (AAH). I take this opportunity to place before you the Annual Report on the activities and performance of your company for the financial year ending 31st March 2017

General Economic Environment:

Total government revenues for the period Jan-Nov 2016 were RO6.21bn, a decrease of 22.2% over the same period for 2015. Net oil revenues contributed around 50% on an average realization of $40.1/barrel as against $56.5/barrel for 2015. Oil output averaged 1,004,300mln barrels per day in 2016, largely hitting the production target for that year. To offset the drop in oil prices, the government has ramped up oil production, pushing its output to record levels.

Oman’s Baa1 rating with a stable outlook by International ratings agency Moody’s reflects its relatively stable government balance sheet against credit challenges, including its heavy reliance on the oil and gas sector.

The Year in Retrospect:

The year 2016-17 was asuccessful year for Al Anwar Holdings and the Company reported best-ever profit in its history. Our investments in Oman contributed positively by way of share of profits.

During the year we successfully completed the sale of 1.3 Million shares in Falcon Insurance Co. SAOC generating liquidity of over RO 2.4 million and we continue to hold 19% stake in the merged entity Arabia Falcon Insurance SAOC.

Aiming a healthy diversification of our investment portfolio, post balance sheet date, AAH acquired 43.51% stake during April, 2017, in The Canadian Innovation Company for Education Services SAOC, which owns and operateAl Ruwad International School for RO 4.35mn.

We have always scouted for growth business with a penchant for turnaround stories. At the same time we have balanced our portfolio with regular income generating assets.

Financial Overview of Al Anwar Group:

The consolidated financial statements presented are an outcome of the following:

  1. The revenues generated and the costs incurred for the year ended as on 31st December, 2015 by its subsidiaries namely:
  2. Al Anwar International Investment LLC, 100% subsidiary of AAH, primarily being used as investment arm for AAH, and
  3. Al Anwar Development LLC,100% subsidiary of AAH,primarily being used as investment arm for AAH
  4. Falcon Insurance Co. SAOC, 51% subsidiary of AAH, engaged in Insurance activity in Oman.
  5. The Share of Profit / (Loss) achieved by Associate Companies for the year ended as on 31st December, 2016in which Al Anwar Holdings owns between 20% and 50% of share capital.
  6. Dividends from other investments.
  7. Realized and unrealized gains / losses from other listed/unlisted securities.

I am pleased to report that,your company has posted a consolidated profit attributable to the shareholders of the parent company of RO 6,223,768 for the year ended 31 March 2017 as compared with profit of RO 4,935,219 for the year ended 31 March 2016 in consolidated Group Accounts, a growth of 26%.

In Parent company has posted a profit of RO 6,420,476 for the year ended 31 March 2017 as compared with profit of RO 3,493,300 for the year ended 31 March 2016,a growth of 84% in parent account.

The Earning per Share (EPS) for the Group was 76 Baizas in 2016-17 as against 33 Baizas in 2015-16.

Net assets, as on 31st March, 2017, of the company was 215 Baizas per share as against 201 Baizas per share as on 31st March, 2016.

Dividends recommended:

In view of available profit, the Board of Directors are pleased to recommend a ……… cash dividend (last year: 10%) and ……….. stock dividend (last year: 16.16%).

Performance of Investments:

Subsidiaries:

  1. Al Anwar International Investments Co. LLC(AAII):

AAII is an investment arm for Al Anwar Holding and is a 100% subsidiary of AAH. The company holds various investments for and on behalf of AAH.

  1. Al Anwar Development LLC (AAD):

AAD is a 100% subsidiary incorporated during the year 2008.In April 2017, AAD purchased, for and on behalf of Al Anwar Holdings, 43.51% stake in The Canadian Innovation Company for Education Services SAOC, which owns and operates Al Ruwad International School in Muscat. The transaction value for this investment was RO 4.35 million.

Associates:

  1. Voltamp Energy SAOG (and its subsidiaries) (VE):

VE reported a growth in its revenue of 14.9% and a growth of 9.9% in net profit for the period. The company was able to sustain and perform better as compared to last year due to its proactive & prudent approach, supported by good order book.

  1. Al Maha Ceramics Company SAOG(AMC):

Al Maha reported a reduction of 9.4% in the revenue during the period. Accordingly, net profit also declined by 12.9%. Al Maha is facing stiff competition, however, the prudent policies of Board and management ensured that the company was resilient and achieved comparatively unscathed results as compared with its competitors.

  1. Arabia Falcon Insurance SAOC (formerly known as Falcon Insurance Co. SAOC) (Falcon):

During the year AAH sold 1,301,329 shares at a price of RO 1.876 per share generating total net sale proceed of RO 2.432 million. Out of the total sale proceeds, 10% has been deposited by the buyer in an escrow account, which is payable after 365 days, in accordance with terms of Escrow agreement signed by AAH with the buyer. Simultaneously, Falcon Insurance has acquired entire business, assets and liabilities of Oman Branches of Arabia Insurance, against issuance of new shares in Falcon Insurance Company SAOC.

Subsequent to above transactions, Al Anwar Holdings would retain 19% stake in Arabia Falcon Insurance Company SAOC (merged entity) and hence, this investment shall cease to be Subsidiary as on 28th March 2017 and would be treated as Associate for the subsequent period.

This transaction has generated a nominal profit of RO 0.166 million on sale of stake and a Fair Value gain on the remaining stake of RO 0.263 million in the Group Consolidated Financials of Al Anwar Holdings SAOG.

Falcon reported a decline of 34% in gross premium written mainly on account of market competition and regulatory changes with respect to Group Credit Life policies issued by banks. Underwriting results, however, registered a marginal growth of 2%. The management has taken steps to reduce the impact by acquiring new businesses in both life and non-life segments.

Other Investments:

  1. Oman International Development and Investment Co. SAOG (OMINVEST):

As at end of the quarter, AAH (Including Group Companies) held 10.15% stake in OMINVEST and recorded a total fair value gain of RO 5.471 million on its entire holding during the period. Part of the fair value gain i.e. RO 2.612 million is recorded as Investment Income under comprehensive income and RO 2.859 million is recorded as Changes in Fair value on available for sale investments under other comprehensive income.

  1. Almondz Global Securities Limited, India (AGSL):

The share price of AGSL improved during the year as there was positive movement in the market, however, the Indian currency continued to maintain rise and as such, AAH has booked a net gain of RO 135,831 (LY: Loss RO13,955) on fair valuation.

  1. Legal Case Recovery from Addax Bank:

During the year the company received partial claim amount from Addax Bank – Bahrain towards the legal judgment amounting to RO 1.169 million (net), which was adjusted against the carrying value of investment in Addax Bank amounting to RO 0.256 million and balance amount was booked as gain of RO 0.912 million during FY 2016-17.

  1. Real estate project:

The Board of Directors is contemplating to develop a commercial building on the plot of land purchased during the year. The proposed building would be utilized to house its head office.

The Year Ahead & Future Projects:

Year 2017 started on an optimistic note with Government’s thrust on a holistic development of Oman’s economy, the trickle down benefits of which will lead to a healthy corporate performance for the year. GDP and revenue growth is expected to take off better from 2016 as the oil price have settled at a higher level in response to the output cut by OPEC/Non-OPEC members and at present are averaging higher than the budget estimates.

AAH will continue to pursue its ‘buy and build’ strategy that seeks value creation by increasing scale and unlocking potential in portfolio companies through serial bolt-on acquisitions and strategic initiatives, which ensures income generation and sustainable earnings over the medium and long term.

Omanisation:

AAH as a company and as a group has always been fully committed of recruiting and training Omani employees and developing a local talent.

Corporate Governance:

The company stands committed to fully adhere to the Code of Corporate Governance issued by the Capital Market Authority. A report on Corporate Governance and also a Management Discussion and Analysis Report have been included in the Annual Report.

Corporate Social Responsibility Activities (CSR)

AAH strives to serve the community through participation in various programs, e.g., educational, sports, cultural, community, and environmental causes in Sultanate of Oman. An amount of RO 20,000 was approved by AGM at the beginning of the year and the company has distributed the same to about 15 charity organisation during the year

Corporate Governance:

The company stands committed to fully adhere to the Code of Corporate Governance issued by the Capital Market Authority. A report on Corporate Governance and also a Management Discussion and Analysis Report have been included in the Annual Report.

On behalf of the Board, I would like to wish His Majesty Sultan Qaboos Bin Said and to convey the loyalty and gratitude and extreme thanks and appreciation to His Majesty’s Government for incentives and support for all round sustainable development in the Sultanate.

The Board records its sincere appreciation to the Ministry of Commerce and Industry, Capital Market Authority, customers, bankers and Auditors for their continued support to the company and the Group.

I would also like to express my sincere appreciation to the Board of Directors of all Al Anwar Group companies for direction given to the management of the respective companies. I place on record my sincere thanks and appreciation for the dedicated efforts of the management team and all employees of the holding company and the group companies.

I would also like to convey my sincere thanks to the shareholders of the company for the confidence they have reposed in the company and in its Board.

For & on behalf of the Board of Directors of

Al Anwar Holdings SAOG


Masoud bin Humaid Al Harthy
Chairman

Report for FY 2015-16