Directors’ Report for the year ended 31st March 2020

Dear Shareholders,

On behalf of the Board of Directors, I have great pleasure in welcoming you to the 26thAnnual 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 2020.

Overview of the Group results

The summary of our results are as follows: –

(OMR’000) 2019-20 2018-19
Total Income  

2,029

 

2,004

Total Expenditure  

(1,522)

 

(1520)

Profit before Fair value change 507 484
Fair value (loss) gain in financial assets  

(330)

 

128

 

Net Profit

 

177

 

612

The consolidated profit for the year ended 31stMarch 2020 was lower compared to previous yearmainly due to fair value loss of OMR 330,000 in our marked to market investments in MSM and other investments at fair value.  In addition, we recognized fair value loss directly in equity in the amount of OMR228,000. Consequently, our total fair value loss at 31stMarch 2020, amounted to OMR 528,000. The MSM index dropped by12.9% from 1st January 2020 to 31st March 2020 due to adverse impact of COVID-19 and Oil price decline.

Our shareholders equity at 31st March 2020 was OMR 33 million andour total borrowings amounted to OMR 18 million. As on 31st March 2020, our Debt was 55% of our equity (Last year: 57%).

The Earning per Sharewas 1baizas for the year ended 31stMarch 2020 as against 3baizasin the previous year.

Net assets per share as at 31st March 2020 was 163baizasper share as against 173 baizasfor the previous year.

Our share price at 31stMarch 2020 was 66 baizas, and was trading at 60% below the book value.

During the year, we established the Al Anwar Industrial Investments SAOC to focus on the manufacturing sector and seek strategic partners to grow our manufacturing cluster.

We will continue to focus on our three main sectors i.e. Financial Services, Manufacturing and Education.

 

Dividends

Our retained earnings as at 31st March 2020 was OMR 8.349million, the Board of Directors recommend for shareholders’approval a cash dividend of 6% (last year: 10%).

Financial statements

The audited consolidated financial statements presented includes the following:

    1. The resultsof SubsidiaryCompanies for the year ended 31st December, 2019 of the following:
      • Al Anwar International Investment LLC, 100% subsidiary;
      • Al Anwar Development LLC,100% subsidiary; and
      • Al Anwar Hospitality SAOC, 100% subsidiary inhospitality sector.
      • Al Anwar Industrial Investments SAOC (under formation) 100% subsidiary.
    2. The share of profit (loss) of Associate Companies for the year ended 31st December, 2019(AlRuwad International Education Services SAOC upto 31stJanuary 2020) in which AAH owns between 20% and 50% of share capital or has significant influence.
    3. Dividends from other investments.
    4. Realized and unrealized gains / losses from other listed/unlisted securities.

Performance of Investments

Subsidiaries

1. Al Anwar International Investments LLC(AAII)

AAII owns investments of OMR 7,801,944 at 31stDecember, 2019.

2. Al Anwar Development LLC (AAD)

AAD owns investments of OMR 499,878 at 31stDecember, 2019.

3. Al Anwar Hospitality SAOC (AAHS)

We have entered into a Hotel Management Agreement with Accor Hotels for developing a 4 Star Business Hotel – NOVOTEL Muscat – Azaiba, near Airport, on a freehold land owned by us. Total development cost of the project is estimated to be around OMR 11.5mn to be funded by an optimum mix of debt and equity.  We have now received all regulatory permissions.

4. Al Anwar Industrial Investments SAOC (under formation)

Al Anwar Holding SAOGestablished a closed joint stock company in the Sultanate of Oman together with Al Anwar International Investments LLC (AAII) and Al Anwar Development LLC (AAD) in accordance with the laws of the Sultanate of Oman, under the name of “Al Anwar Industrial Investments SAOC” (“Company”).

The Company has been established with an objective to transfer all the manufacturing sector associates to this company as cluster and seek strategic investors up to 40% stake in the company’s equity, to grow the cluster by acquisitions, mergers and enhancement of technology.

 

Associates

1. Al Maha Ceramics SAOG (AMC):

AMC reported revenue of OMR 7,440,084 for the year ended on 31stDecember 2019, as compared with OMR 8,436,617 for last year, a decline of 12%.  Net profit after tax for the period is OMR 1,011,312 as compared to OMR 1,203,165 in the previous corresponding period, decrease of 16%, which is mainly due to general economic condition, competitive scenario and increase in cost of utilities.

2. Voltamp Energy SAOG (VE):

VE reported revenues of OMR 41,175,986,during the year ended on 31st December 2019, an increase of 4% as compared to last year due to improved performance of its Sohar facility. VE achieved profit after tax (attributed to shareholders of Parent Company) of OMR 342,759 during the year as compared to a profit of OMR 31,067 in last year for the same period. During the year company initiated many cost control initiatives which helped the company to secure orders in the competitive market and increasing the profits of the company.

3. Arabia Falcon Insurance Company SAOG(AFIC):

AFIC recorded Gross Written Premium of OMR 16,904,632 during the year ended on 31stDecember 2019 as compared to OMR 16,065,241 for the last year same period, a growth of 5%. The Net profit after tax of company for the period is OMR 1,122,144 against OMR 1,040,713 of last year, a growth of 8%. AFIC has been consciously restructuring its portfolio to phase-out large loss-making accounts coupled with concerted efforts to write new businesses. The measures taken by the management has resulted in considerable reduction in overall net claims ratio to 49% in 2019 from 64% in 2018.

4. Al Ruwad International for Education Services SAOC (AIS):

AIS recorded decline in revenue and profit before tax in the half year ended on 31stJanuary 2020, mainly due to student migration to school with lower fees and change of curriculum instructed by MOE. Phase 2 of the expansion project is being utilized for the academic year 2019-20. The International Baccalaureate (IB) curriculum, IBDP has been authorized and IBPYP and IBMYP authorizationsvisits are  expected to be concluded by October2020.

5. National Biscuits Industries Ltd. SAOG (NABIL):

NABIL reported revenue of OMR 6,932,406 for the half year ended on 31stDecember 2019 as against OMR 6,175,030 in the corresponding period of last year, a growth of 12% over last year. The net profit for the half year is at OMR 438,589 as against OMR 335,620 for the corresponding period in the previous year, a growth of 31% over last year. The NABIL brand enjoys a significant brand image in Oman market and a good brand presence of across the GCC and the other countries.

6. National Detergent Co. SAOG (NDC):

NDC reported revenues of OMR 19,689,541 and net profit of OMR 620,521 for the year ended on 31st December 2019 exhibiting a decline of 8% on revenue and decline of 30% on Net profit over last year. The reduction was a result of falling demand in itscore GCC markets. The flagship brand BAHAR maintained its premier market position in Oman.

7. Oman Chlorine SAOG (OC)

OC reported revenue of OMR 15,046,017 for the year ended on 31st December 2019 displaying a growth of 20% over the same period of last year. Net loss (Attributable to Parent Company Shareholders) for the year is OMR 154,566 as compared to profit of OMR 1,592,123 for the last year, mainly on account of loss reported by the subsidiary located in UAE and Qatar.

Union Chlorine LLC, UAE, a subsidiary, posted loss of OMR 1,528,395. The parent company’s share of loss, including that of its 100% subsidiary’s share, is OMR 915,508. The continued lower selling prices of the products and weak global prices for caustic lye and caustic flakes resulted in lower revenue and loss during 2019 despite capacity utilisationremaining at optimal level. The Calcium Chloride Project commenced commercial operation from 1st April 2019.

Gulf Chlorine WLL, Qatar, a subsidiary, has commenced commercial production of its main plant from 27th February 2019. The company posted loss of OMR1,701,751 and parent company’s share of loss amounted OMR 867,893.  The plant is currently operating at capacity utilization of 47.5% which is the main reason for losses.

 

Other significant investments

1. Ominvest perpetual bonds

Ominvest perpetual bonds are with an interest rate of 7.75% per annum payable twice a year in June and December.  The rate is guaranteed for 5 year and there afterthe rates will be reset based on an agreed formula. For the year ended as on31stMarch 2020, AAH earned the interest amounting to approximately OMR 916,000.

2. Dhofar International Development and Investment Co SAOG (DIDIC)

We have an equity stake of 8.53% in DIDIC as at 31stMarch 2020.The investment was carried at market value of OMR 6,223,180.  During the year we purchased 1 Million DIDIC Bonds at interest rate of 9% per annuum, at 31st March 2020, the accrued interest recorded amounted to approximately OMR 26,000.

Omanization

AAHGroup has always been fully committed of recruiting and training Omani employees and developing and promoting the local talent.AAH Omanization level at 31stMarch 2020 was 45%.

The year ahead

We foresee a challenging year ahead due to temporary suspension of public activities to contain the COVID-19pandemicIn Oman and around the world, andthe significant drop in oil prices due to a number of political and economic factors.

Although, the Government of Omanhas taken measures and issued directives to support businesses and the economy at large, these conditions have significantly impacted the economic and business environment in which the Group operates. The situation, including the government and public response to the challenges, continues to progress and rapidly evolve.

Though, the group cannot estimate the length or gravity of the impact of the COVID – 19 outbreak at this time, we are well diversified and resilient and we are cautiously optimistic of a satisfactory performance in the coming year.. Our objective will be to ensue that our associate companies continue to perform profitably and we as a Group preserve the value of our investments and retain liquidity in the business.

Acknowledgement

At the end of the report we wish to express our condolences to the Omani people for the demise of the late Sultan Qaboos Bin Said Bin Taimur the establisher of the Omani renaissance. We also express our loyalty to His Majesty Sultan Haitham Bin Tarik. May Allah protect him and guide him for the benefit of Oman and its people.

The Board records its sincere appreciation to Ministry of Commerce and Industry, Capital Market Authority, Muscat Securities Market, Bankers, Auditors, Customers and Shareholders for their continued support to AAH and the group companies.

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 managements 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 group companies.

I would also like to convey my sincere thanks to the shareholders of Al Anwar Holdings 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