Directors’ Report for the year ended 31st March, 2018

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present the unaudited consolidated results of A1 Anwar Halflings SAOG (AAH) for the financial year ended 31stMarch, 2018

General Economic Environment:

The Oman Government has announced a Balanced Budget for 2018 projected GDP growth of 3% with primary focus on maintaining the current level of economic activities, to sustain the private sector investments and in line with the objectives set out by the Ninth Five-year Development Plan (FY2016-2020).

The Government’s objective is to diversify the economy away from Oil dependency, and to ensure the implementation and completion of projects in key sectors in addition to the oil and gas sector. These objectives will lead to achieve a positive impact on economic growth and further, revitalizing non-oil revenues and enhancing their contributions to overall government revenues. Also, limiting the growth of public debt, and reduce it over the coming years whilst maintaining domestic liquidity would provide comfort to the Banking sector. All these are initiatives are expected to provide a fertile investment climate for your company.

The Year in Retrospect:

The year 2017-18 was an eventful year for Al Anwar Holdings which witnessed a series of successful investment transactions. Our investments contributed positively by way of share of profits & realized gains.

During the year the Company received ‘Quality of Disclosure’ award instituted by the Muscat Securities Market (MSM) in recognition of our commitment to apply the best disclosure and corporate governance practices,

During the year we successfully completed the sale of 9% stake in OMINVST and generated liquidity of around OMR 31 million and realized a gain of OMR3.67 million,

Aiming a healthy diversification of our investment portfolio, AAH acquired stake in three companies namely
Oman Chlorine SAOG (15.11%), National Detergent Co. SAOG(20.94%)and National Biscuits Industries Ltd. SAOG(28.92%).

AAH  has also entered into a Hotel Management Agreement with Accor Hotels for developing 4 Star Business Hotel “NOVOTEL” with an objective of making a foray into the tourism sector in Oman.
Total investment outlay for the project is estimated to be around OMR 11.5 million.

AAH has entered into a Shareholder’s Agreement with Hormozgan Cement Co. (HCC), Iran to establish “Hormuz Al Anwar Cement SAOC” (HAC) with an object to start a green-field cement grinding unit in the Special Economic Zone,  Al Duqm (SEZD) with capacity of 1.0 MTPA.
Total investment outlay for the project is expected to be OMR 14 million We continue to scout for business with growth opportunities, while at the same time maintaining balanced portfolio with regular Income generating assets.

Financial Overview of Al Anwar Group:

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

  1. The revenues generated and the costs incurred up to 31st December, 2017 by its subsidiaries namely: i. Al Anwar International Investment LLC, 100% subsidiary of AAH, primarily being used as an investment arm.
    ii. Al Anwar Development LLC, 100% subsidiary of AAH.
    iii. Al Anwar Hospitality SAOC, 100% subsidiary of AAH and
  2. The Share of Profit/ (Loss) achieved by Associate Companies up to 31st December, 2017 in which AAH owns between 20% and 50% of their share capital or where AAH has significant influence on the Board of Directors of the company,
  3. Share of Profit / (Loss) achieved by Al Ruwad international Education Services SAOC – Associate- up-to 31st Jan. 2018.
  4. Dividends from investments
  5. Realized gains made from divestments.
  6. Un-realised gains/losses from other listed & unlisted securities.

Your company has achieved a consolidated group net profit, after tax, attributable to shareholders of parent company, of OMR 3.866 million for the year ended 31st March, 2018 as against OMR 6.224 million the year ended 31st March, 2017, an decrease of 38%.

The earnings per share (EPS) was 19 Baisa for the period ending as on 31st March, 2018 as against EPS of 31 Balsa for the Year ending as on 31st March, 2017, adjusted for the stock dividend declared in 2017.

Net asset per share of the group is 179 Baisa per share as on 31st March, 2018, on the increased capital due to stock dividend declared in 2017, as against 188 Baisa per share as on 31st March, 2017.

Dividends recommended:

In view of available profit, the Board of Directors are pleased to recommend a 12.5% cash dividend (last year: 10%).

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 Al Ruwad International Education Services SAOC, which owns and operates Al Ruwad International School in Muscat.

  1. Al Anwar Hospitality SAOC (AAHS):

The wholly owned subsidiary has been formed in the 2017 with the object to develop hotel project of AAH.

Associates:

  1. Al Maha Ceramics SAOG (AMC):

Al Maha reported a reduction of 2.4% in the revenues and a 28% decline in net profit for the period, which is mainly attributed falling selling prices, rise in cost of electricity by approximately 50.0% and an increase in natural gas price by 3.0%. The company is following prudent and proactive approach to counter prevailing market conditions.

  1. Voltamp Energy SAOG (VE):

VE reported a growth in its revenue of 4.6% but a decline of 16.6% in net profit for the period. The decline in profit can be attributed mainly to increase of major raw material prices, utility charges and intense competition the market.

  1. Arabia Falcon Insurance Company SAOG (AFIC) (Formerly known as Falcon Insurance Co SAOC):

In March 2017 we completed the part divestment of our holding in Falcon Insurance, and merger of the entire business, assets and liabilities of Oman Branches of Arabia Insurance, into Falcon Insurance. The merged entity, Arabia Falcon Insurance Co. SAOG, registered growth in business however a decline in profit was recorded as a result of higher net claim ratio and higher expenses ratio.

The company offered 25,825,415 Shares (25%) to the public for the subscription through the IPO. The shares got listed on the Muscat Security Market (MSM) on 14th May 2018. Al Anwar Holdings holds 22.6% stake in AFIC, as of the date.

  1. Ruwad International Education Services SAOC (AIES):

During the year, AAH has acquired 43.51% stake in AlES, which owns and operates Al Ruwad International School in Muscat. The school started the year with good results due to registering more students than last year, growth in gross revenue and net profit.

Other Investments:

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

In November 2017, AAH completed the sale of 62.943 million shares of OMINVEST (9.0% stake)@ OMR 0.495 per share, with total consideration value of OMK 31,157 million to Oman National Investment Corporation SAOC (ONIC). This transaction had a positive impact on AAH’s statement of Income for FY2017-l8 of around OMR 3.7 million. Post this transaction AAH along with its subsidiaries held 1.15% stake in OMINVEST.

  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 be weak and as such, AAH has booked a net gain of OMR 101k (LY: OMR 136k) on fair valuation.

  1. National Biscuits Industries Ltd. SAOG:

AAH has entered into a binding Share Purchase and Sale Agreement (SSPA with a potential buyer or sale of 289,197 shares (28.92% stake) of National Biscuits ind. Ltd. SAOG (NABIL) held by AAH, @ QMR 5.632 per share, with total cash consideration value of OMR 1.629 million. The execution of this transaction is subject to receiving the relevant approval from the Capital Market Authority (CMA) and other regulatory approvals.

The Year Ahead & Future Projects:

As significant part of profit reported by the company is dependent upon market valuation of its investments classified as “Investment at Fair Value thru Profit & Loss”, predictions or projections for future should be dealt with caution.

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 the local talent. Currently, AAH has 50% Omanisation ratio in the company.

Corporate Social Responsibility Activities (CSR)

AAH strives to serve the community through participation in various programs, e.g., educational, sports, cultural, community, SME support and environmental causes in Sultanate of Oman. An amount of OMR 25,000 was approved by AGM at the beginning of the financial 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.

Thanks and Appreciation :

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 the year ended 31st March, 2018