Orascom construction financial statments, Study Guides, Projects, Research of Business Finance

Download Orascom construction financial statments and more Study Guides, Projects, Research Business Finance in PDF only on Docsity! ORASCOM CONSTRUCTION PLC Consolidated Financial Statements For the year ended 31 December 2021 Orascom Construction PLC TABLE OF CONTENTS Independent auditors’ report on the consolidated financial statements 1-8 Consolidated statement of financial position 9 Consolidated statement of profit or loss and other comprehensive income 10 Consolidated statement of changes in equity 11 Consolidated statement of cash flows 12 Notes to the consolidated financial statements 13 - 49 KPMG LLP, a limited liability partnership incorporated and licensed in the Dubai International Financial Center, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. KPMG LLP is registered with the Dubai Financial Services Authority. 3 Orascom Construction PLC Independent Auditors’ Report 31 December 2021 Key Audit Matters (continued) 1 Accounting for construction contracts (continued) How our audit addressed the key audit matter (continued) • evaluating the financial performance of contracts against budget, available third- party evidence and historical trends; • conducting site visits to certain higher risk or larger value contracts, physically observing the progress of individual projects and identifying areas of complexity through observation and discussion with site personnel; • assessing the reasonableness of the Group’s judgment in respect of forecast contract out-turn, contingencies, settlements and the recoverability of contract balances via reference to our own assessments based on certain quantitative and qualitative factors, historical outcomes and industry norms; • analyzing correspondence and other relevant documents obtained by management from customers around variations and claims and considering whether this information is consistent with the estimates made by the management; • inspecting selected contracts for key clauses, identifying relevant contractual mechanisms such as liquidated damages, defects liability and warranties and, assessing whether these key clauses have been appropriately reflected in the amounts recognised in the consolidated financial statements; • assessing whether the amounts recognised in the consolidated financial statements resulting from the estimates and assumptions made represent a balanced view of the risks and opportunities pertaining to each contract position; • considering whether provisions against contracts sufficiently reflect the level of risk, and challenging management’s judgment in this area with reference to our own assessments; and • considering the adequacy of the Group’s disclosures in the consolidated financial statements in respect of contract accounting and the key risks relating to these amounts. 2 Expected credit loss allowances on receivables Refer to note 9 of the consolidated financial statements Key audit matter The Group is exposed to credit risk on its receivable balances including contract receivables, contract assets, and retention receivables. The determination of expected credit loss (“ECL”) involves significant estimates and judgement. Key areas involving judgements include current and future looking external factors, probability of default and loss given default. KPMG LLP, a limited liability partnership incorporated and licensed in the Dubai International Financial Center, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. KPMG LLP is registered with the Dubai Financial Services Authority. 4 Orascom Construction PLC Independent Auditors’ Report 31 December 2021 Key Audit Matters (continued) 2 Expected credit loss allowances on receivables (continued) Key Audit Matters (continued) Due to significant judgements and complexities involved in the computation of ECL for determining impairment provision at the year end, this is considered as a key audit matter. How our audit addressed the key audit matter • obtaining an understanding of the Group’s process for estimating ECL and assessing the appropriateness of the ECL preparation methodology against the requirement of IFRS 9; • identifying and testing key controls over the process for estimating ECL; • testing key inputs of the model, such as those used to calculate the likelihood of default and the subsequent loss on default, by comparing to the historical data; and • assessing the reasonableness of key assumptions and judgments made by the management in determining the ECL allowances including segmentation of receivables, selection of appropriate ECL model, macroeconomic factors and expert credit judgments. 3 Litigation and claims Refer to note 26 of the consolidated financial statements Key audit matter Considering the nature of the Group’s operations, it can be exposed to a number of litigations and claims. The recognition and measurement of provisions, contingent liabilities and contingent assets as well as making the necessary disclosures in respect of litigation and claims requires significant judgment by the management in assessing the outcome of each legal case which is based on management’s discussion with internal and external legal advisors. Due to the significance of the litigations and claims and the judgment applied in assessing and measuring the resulting outcome, this is considered as a key audit matter. How our audit addressed the key audit matter Our audit procedures included the following: • evaluating the Group’s policies, procedures and controls in relation to litigation, claims and provision assessments; • obtaining inputs from the Group’s in-house legal counsel with regards to the Group’s litigations and claims, making independent enquiries and obtaining confirmations from external lawyers to understand the background of each case, legal position and the material risks that may impact the Group’s consolidated financial statements; and KPMG LLP, a limited liability partnership incorporated and licensed in the Dubai International Financial Center, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. KPMG LLP is registered with the Dubai Financial Services Authority. 5 Orascom Construction PLC Independent Auditors’ Report 31 December 2021 Key Audit Matters (continued) 3 Litigation and claims (continued) How our audit addressed the key audit matter (continued) • assessing reasonableness of judgment made by management in assessing and measuring the current and final outcome of the claim, determining the adequacy of the level of provisioning or disclosure in the Group’s consolidated financial statements in accordance with IAS 37. 4 Accounting for tax Refer to note 11 of the consolidated financial statements Key audit matter The Group operates in a number of tax jurisdictions. The complexities of local and international tax legislations require an understanding of the applicable tax laws and regulations in these jurisdictions. Furthermore, the recognition of deferred tax assets involves significant judgment and estimates with regards to the Group’s future operations and the applicable tax laws in the respective jurisdictions and, as a result, this is considered as a key audit matter. How our audit addressed the key audit matter Our approach included: • identifying and testing key controls over calculation for income tax and deferred tax; • involving our tax specialists to assess the Group’s tax positions including deferred tax assets, its compliance with the relevant tax legislations, to analyse and challenge the assumptions used by management in determining the tax provisions; • for the purpose of assessing the valuation of deferred tax assets recognised in the Group’s statement of financial position, we have reviewed and assessed the reasonableness of the assumptions used in projecting the Group’s future taxable profits, the availability of tax losses in the respective jurisdictions and the expected tax planning strategies; and • considering the adequacy of the Group’s tax disclosures in the consolidated financial statements and its compliance with IFRS. Other Information Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditors’ report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. Orascom Construction PLC independent Auditors’ Report 31 December 2021 her Legal and Regulatory Requirement: Report o We furtner report that the consolidated financial staternents comply, in all material espects, with the applicable provisions of the Companies Law pursuant to DIFC Law No. 6 of 2018. bul Lc? Dubai, UA Tel: 04~ 4030300 Emilio Pera DFSA Reference No.: 1008702 Dubai, Unized Arab Emirates Date: 21 March 2022 8 KPMG LLP, a limited linblily partnership incorporated and licensed in tha Dubal International F nancial Genter, and a member frm of the KPMG glebat Organizaiurvof independent member firms affiates wih KPMG Intemational Limited, a private Englh company limited by guarantes, Al righls reserved. KPMG LLP is reg stored with the Dubai Financial Servicas Authority,  Emilers Assets Non-current assets Total non-current assets . Current assets Equity 199.2 13.8 46.8 426.4 414 727.3 1 307.3 1462.4 1,099.5 02 505.7 3,375.1 4,102.4 116.8 480.2 (305.4) 3459 473.8 3,092.1 3,788.5 Equity attri butable to owners af the Company Total equity Liabilities Non-curret 638.5 1 50.1 688.6 12 499 Total non-current liabilities 54.5 Current liabilities 629 1,531.1 13614 299.6 59.1 45.2 jotal current liabilities 3,359.3 Total liabilities 3,413.8 Total equity and liabilities 4 4102.4 10 Orascom Construction PLC Year Ended Report 2021 Orascom Construction PLC CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended $ millions Note 31 December 2021 31 December 2020 Revenue (25) 3,542.9 3,371.1 Cost of sales (21) (3,196.5) (3,048.3) Gross profit 346.4 322.8 Other income (22) 2.3 14.2 Selling, general and administrative expenses (21) (192.4) (186.4) Operating profit 156.3 150.6 Finance income (23) 11.6 21.3 Finance cost (23) (27.9) (31.1) Net finance cost (16.3) (9.8) Income (loss) from equity accounted investees (10) 27.8 (3.2) Profit before income tax 167.8 137.6 Income tax (11) (42.5) (40.5) Net profit for the year 125.3 97.1 Other comprehensive income: Items that are or may be reclassified to profit or loss Foreign currency translation differences (16.6) 15.3 Other comprehensive (loss) income, net of tax (16.6) 15.3 Total comprehensive income 108.7 112.4 Net profit attributable to: Owners of the Company 113.4 90.9 Non-controlling interest (17) 11.9 6.2 Net profit for the year 125.3 97.1 Total comprehensive income attributable to: Owners of the Company 97.7 105.8 Non-controlling interest (17) 11.0 6.6 Total comprehensive income 108.7 112.4 Earnings per share (in USD) Basic earnings per share (24) 0.97 0.78 The notes on pages 13 to 49 are an integral part of these consolidated financial statements. 13 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 1. General Orascom Construction PLC (‘OC PLC’) is a Public Company, incorporated with registered number 1752 in the Dubai International Financial Center (DIFC) with its head office located at Gate Village-Building 1, DIFC, Dubai, UAE. OC PLC is dual listed on the NASDAQ Dubai and the Egyptian Stock Exchange. The consolidated financial statements for the year ended 31 December 2021 comprise the financial statements of OC PLC, its subsidiaries and joint operations (together referred to as the ‘Group’) and the Group’s interests in associates and joint ventures. OC PLC was incorporated on 18 January 2015 as Orascom Construction Limited, a company limited by shares and converted to a Public Company under the Law, DIFC Law No. 5 of 2018 on 12 November 2018. OC PLC is primarily engaged as an international engineering and construction contractor focused on large-scale infrastructure, complex industrial and high-end commercial projects in the United States,Middle East, Africa and Central Asia for public and private clients. 2. Basis of preparation 2.1 General These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards(”IFRS”), and applicable requirements of the Companies Law pursuant to DIFC Law No. 5 of 2018 and the Capital Market Authorities in Dubai and Egypt. The consolidated financial statements have been prepared on the historical cost basis, except when otherwise indicated. The financial year of OC PLC commences on 1 January and ends on 31 December. These consolidated financial statements are presented in US dollars (‘USD’), which is OC PLC’s presentation currency. All values are rounded to the nearest tenth million (in millions of USD), except when stated otherwise. The consolidated financial statements have been authorised for issue by the Company’s Board of Directors on 21 March 2022. 3. Summary of significant accounting policies 3.1 Consolidation The consolidated financial statements include the financial statements of OC PLC, its subsidiaries and the proportion of OC PLC’s ownership of joint operations. Subsidiaries Subsidiaries are all companies to which OC PLC is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its control over the investee, generally accompanying a shareholding of more than half of the shares issued and related voting power. In assessing control, potential voting rights that are presently exercisable or convertible are taken into account. Subsidiaries are fully consolidated from the date that control commences until the date that control ceases. When OC PLC ceases to have control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognized in profit or loss including related cumulative translation adjustments accumulated in other comprehensive income. If it becomes an associate, the interest retained is subsequently valued in accordance with the equity method. The principal subsidiaries are listed in Note 29. Transactions eliminated in the consolidated financial statements Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of OC PLC’s interest in the investees. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. 14 Orascom Construction PLC Year Ended Report 2021 Orascom Construction PLC 3.2 Discontinued operations / assets held for sale A discontinued operation is a component of OC PLC’s business which: • has operations and cash flows that can be clearly distinguished from the rest of OC PLC; • represents a separate major line of business or geographical area of operations; • is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; and • is a subsidary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale. When an operation is classified as a discontinued operation, the comparative information in the statement of comprehensive income and the consolidated statement of cash flows are reclassified as if the operation had been discontinued from the start of the comparative period. In the statement of financial position, the comparative numbers are not reclassified. 3.3 Business combinations The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs. The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non- controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in profit or loss. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument, is measured at fair value with changes in fair value recognized either in profit or loss or as a change to other comprehensive income. Contingent consideration classified as equity is not remeasured and subsequent settlement is accounted for within equity. Non-controlling interests Non-controlling interests are presented as a separate component in equity. Changes in the Group’s interest in a subsidiary or joint operation that do not result in a loss of control are accounted for as an equity transaction. 3.4 Associates Associates are those companies in which the Group exercises significant influence, but does not have control over the financial and operating policies, which is presumed to exist when the Group holds 20 percent to 50 percent of the shareholding and related voting rights of the other entity. Associates are accounted for by applying the ‘equity method’. The Group’s share of profit or loss of an investee is recognized in profit or loss from the date when significant influence begins up to the date when that influence ceases. Investments in associates with negative shareholder’s equity are impaired and a provision for its losses is recognized only if the Group has a legal or constructive obligation to cover the losses. Equity changes in investees accounted for using the equity method that do not result from profit or loss are recognized directly in other comprehensive income. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Unrealized gains on transactions between two associates are not eliminated. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 3.5 Joint arrangements Under IFRS 11 investments in joint arrangements are classified as either joint ventures or joint operations depending on the contractual rights and obligations of each investor. Those joint arrangements that are assessed as joint ventures are accounted for using the equity method. Joint operations are accounted for using the line-by-line accounting. Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted subsequently for the group’s share in the post-acquisition profit or losses and movements in comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture (which includes any long-term interest that, in substance, forms part of the Group’s net investment in joint ventures), the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the joint venture. A joint operation is proportionately consolidated until the date on which the Group ceases to have joint control over the joint operation. Upon loss of joint control, the Group reassesses the joint operation. 3.6 Foreign currency translation Foreign currency transactions The financial statements of subsidiaries and joint operations are prepared in the currencies which are determined based on the primary economic environment in which they operate (‘the functional currency’). Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on the transaction dates. At each balance sheet date, monetary items denominated in foreign currencies are translated into the entity’s functional currency at the then prevailing closing-rates. Exchange differences arising on the settlement and translation of monetary items are included in profit or loss for the period except when deferred to other comprehensive income for investment in equity securities designated as at fair value through OCI (FVOCI) and the effective part of qualifying cash flow hedges. Foreign operations Upon consolidation, the assets and liabilities of subsidiaries with a functional currency other than the US dollar are translated into US dollars using the exchange rates prevailing at the balance sheet date. Income and expense items are translated using exchange rates prevailing at the date of the transactions. Investments in joint ventures and associates with a functional currency other than the US dollar are translated into US dollar using exchange rates prevailing on the balance sheet date. Exchange rate differences arising during consolidation and on the translation of investments in subsidiaries, joint arrangements and associates are included in other comprehensive income, as ‘currency translation adjustments’. When a foreign operation is (partly) disposed of or sold, (the proportionate share of) the related currency translation differences that were recorded in other comprehensive income are recycled to profit or loss as part of the gain and loss on disposal or sale. Goodwill and fair value adjustments arising on the acquisition of a foreign subsidiary are considered as assets and liabilities denominated in the functional currency of the foreign subsidiary. 3.7 Financial instruments I. Recognition and initial measurement Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. II. Classification and subsequent measurement On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the 18 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 3.8 Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date (original maturity) that are subject to an insignificant risk of changes in their fair value and are used by the Group in the management of its short-term commitments. Restricted cash comprises cash balances where specific restrictions exist on the Group’s ability to use this cash. Restricted cash includes cash deposited as collateral for letters of credit issued by the Group. 3.9 Share capital Ordinary shares are classified as equity. Share premium is the excess amount received over the par value of the shares. Incremental costs directly attributable to the issue of new shares are recognized in equity as a deduction, net of tax, from the proceeds. When ordinary shares are repurchased, the amount of the consideration paid, which includes directly attributable costs, net of tax effects, is recognized as a deduction from ‘Reserves’. Repurchased shares are classified as treasury shares and are presented in ‘Reserves’. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in ‘Reserves’, and the resulting surplus or deficit on the transaction is presented in share premium. 3.10 Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and any impairment. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes cost of material, direct labour, other directly attributable cost incurred to bring the asset ready to its intended use, cost of asset retirement obligations and any capitalized borrowing cost. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. When parts of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss. Subsequent expenditures are capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance costs are expensed as incurred. Spare parts of property, plant and equipment are recognized under property, plant and equipment if the average turn-over exceeds 12 months or more, otherwise they are recognized within inventories. Property, plant and equipment under construction Expenditures incurred for purchasing and constructing property, plant and equipment are initially recorded as ‘under construction’ until the asset is completed and becomes ready for use. Upon the completion of the assets, the recognized costs are reclassified from ‘under construction’ to its final category of property, plant and equipment. Assets under construction are not depreciated and measured at cost less any impairment losses. Depreciation Items of property, plant and equipment are depreciated on a straight line basis through profit or loss over the estimated useful lives of each component, taking into account any residual values. Land is not depreciated. Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use. The estimated useful lives for items of property, plant and equipment are as follows: Years Buildings 10 - 50 Equipment 5 - 25 Fixtures, fittings and scaffolding 3 - 10 Depreciation methods, useful lives and residual values are reviewed at each reporting date. Borrowing costs Borrowing costs attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to get ready for their intended use or sale, are recognized as part of the cost of those assets. All other borrowing costs are recognized as ‘Finance cost’ in the period in which they are incurred. 19 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 3.11 Goodwill Goodwill represents the excess of the cost, being the excess of the aggregate of the consideration transferred including the amount recognized for non-controlling interest, of an acquisition over the fair value of the Group’s share in the net identifiable assets and liabilities assumed of the acquired subsidiary at the date of acquisition. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the gain is recognized in profit or loss. Goodwill on acquisition of entities that qualify as subsidiaries is presented under ‘Intangible assets’. Goodwill on acquisitions of entities that qualify as associates or joint ventures is included under Equity accounted investees. Goodwill on acquisition of subsidiaries is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or group of units that are expected to benefit from the business combination through which the goodwill arose, based on past experience. Goodwill is initially measured at cost. After initial recognition, goodwill is measured at cost less any impairment losses. Goodwill is tested annually for impairment; an impairment loss is recognized for the amount by which the cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount of the cash-generating unit is determined by the higher of its fair value less cost to sell and its value in use. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity sold. All other expenditures on internally generated goodwill and other intangible assets are recognized in profit or loss as incurred. 3.12 Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories of raw materials, spare parts and supplies cost are based on weighted average principle or the first-in-first-out method, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. 3.13 Impairment of assets Non-derivative financial assets The Group recognises loss allowances for ECLs on: • financial assets measured at amortised cost; • debt investments measured at FVOCI; and • contract assets. Loss allowances are measured on either of the following bases: • 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and • lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument. The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs: • debt securities that are determined to have low credit risk at the reporting date; and • other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition. The Group measures loss allowances for trade receivables and contract assets at an amount equal to lifetime ECLs. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information. The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due. The Group considers a financial asset to be in default when: • the trade receivable is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or • the financial asset is more than 90 days past due. The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. 20 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC Measurement of ECLs: ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset. Credit-impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is ‘credit- impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Presentation of impairment Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognised in OCI, instead of reducing the carrying amount of the asset. Derivative financial assets Derivative financial assets are measured at fair value. Non-financial assets Non-financial assets that have an indefinite useful life, for example goodwill, are not subject to amortization but are tested annually for impairment or more frequently when indicators arise. Assets with a finite useful life are subject to depreciation or amortization and are reviewed (at least at the balance sheet date) for impairment whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. An impairment loss is recognized for the amount by which the assets’ carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and its value in use. For the purposes of assessing impairment, assets are grouped based on the lowest level for which there are separately identifiable cash flows (cash-generating units). Impairment is recognized as an expense in profit or loss. Non-financial assets, which are impaired, are tested periodically to determine whether the recoverable amount has increased and the impairment has to be (partially) reversed. Impairment losses on goodwill are not reversed. Reversal of impairments is only permitted if in a subsequent period after an impairment loss has been recognized, the amount of the impairment loss decreases and the decrease can be related objectively to an event after the impairment loss was recognized. 3.14 Provisions Provisions are recognized when a present legal or constructive obligation as a result of a past event exists, and it is probable that an outflow of economic benefits is required to settle the obligation. The non-current part of provisions is determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. Warranties A provision for warranties is recognized with respect to services performed and goods sold. Restructuring A provision for restructuring is recognized when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced, the Group has committed itself by public announcement or is expected to commit itself to a restructuring plan. Onerous contract A provision for contracts onerous loss is recognized if the Group expects that the unavoidable costs of meeting the obligations under a contract exceed the economic benefits expected to be received under it. A provision for contracts onerous loss is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognizes any impairment loss on the assets associated with that contract. 23 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 3.17 Leases At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether: • the contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; • the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and • the Group has the right to direct the use of the asset. The Group has this right when it has the decision- making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of the asset if either: • the Group has the right to operate the asset; or • the Group designed the asset in a way that predetermines how and for what purpose it will be used. The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Component’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise the following: • fixed payments, including in-substance fixed payments; • variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable under a residual value guarantee; and • the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group presents right-of-use assets in ‘property, plant and equipment’ and lease liabilities in ‘trade and other payables’ in the statement of financial position. Short-term leases and leases of low-value assets The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. 24 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 3.18 Finance income and cost Finance income comprises: • interest income on funds invested; • gains on the disposal of financial assets; • fair value gains on financial assets at fair value through profit or loss; • gains on the re-measurement to fair value of any pre-existing interest in an acquired business combination; • gains on hedging instruments that are recognized in profit or loss and reclassifications of amounts previously recognized in other comprehensive income; and • interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Group’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. Finance cost comprise: • interest expense on borrowings; • unwinding of the discount on provisions and contingent consideration; • losses on disposal of financial assets; • fair value losses on financial assets at fair value through profit or loss; and • impairment losses recognized on financial assets (other than trade receivables). Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss are expensed as incurred. Foreign currency gains and losses are recognized on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position. 3.19 Employee benefits Defined contribution plan Certain Group subsidiaries provide ‘pension plans’, ‘end of service remuneration plans’ and ‘long-term service benefits’. These pension plans qualify as defined contribution plans. Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available. Short-term employee benefits Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Long-term employee benefits The Group long-term employee benefits are recognized if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably to determine its present value. The discount rate is the yield at the balance sheet date on triple-A (‘AAA’) credit rated bonds that have maturity dates approximating to the terms of the Group’s obligations. Re-measurements are recognized in profit or loss in the period in which they arise. Termination benefits Employee termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. OC PLC recognizes termination benefits when OC PLC is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or when OC PLC is providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value. 25 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC Share based payments The fair value of the amount payable to employees under Long-Term Incentive Plan (LTIP), which are settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the target awards. Any changes in the liability are recognised in profit or loss. 3.20 Income tax Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends. Current income tax assets and liabilities are offset when there is a legally enforceable right to offset and when the current income tax relates to the same fiscal authority. Deferred tax Deferred income tax liabilities are recognized for all taxable temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements (‘liability’ method). Deferred income tax assets are recognized for all deductible temporary differences, unused carry forward losses and unused carry forward tax credits, to the extent that it is probable that future taxable profit will be available against which the deferred income tax assets can be utilized. Deferred income tax is not recognized if it arises from initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither accounting nor taxable profit or loss. Also, no deferred income tax is recognized regarding the initial recognition of goodwill. Deferred income tax is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax relates to the same fiscal authority. 3.21 Segment reporting An operating segment is a component of an entity that engages in business activities for which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity’s Chief Operating Decision Maker (CODM) to make decisions about resource allocation to the segment and to assess its performance and for which discrete financial information is available. The Group determines and presents operating segments on the basis of information that internally is provided to the CODM during the period. 3.22 Consolidated statement of cash flows The consolidated statement of cash flows has been prepared using the ‘indirect’ method. Cash flows in foreign currencies have been translated applying average exchange rates. Currency translation differences are shown separately in the consolidated statement of cash flows. Cash flows from investing activities consist mostly of investments and divestments in property, plant and equipment, intangible assets, and acquisitions insofar as these are paid for in cash. Acquisitions or disposals of subsidiaries are presented as acquisition of subsidiary, net of cash, acquired. Cash flows relating to capitalized borrowing cost are presented as cash flows from investment activities similar as other cash flows to acquire the qualifying asset. 3.23 Earnings per share Earnings per ordinary share are calculated by dividing the profit or loss (net) attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year. In making this calculation the (ordinary) treasury shares are deducted from the number of ordinary shares outstanding. The calculation of the diluted earnings per share is based on the weighted average number of ordinary shares outstanding plus the potential increase as a result of the conversion of convertible bonds and the settlement of share-based compensation plans (share option plans). Anti-dilutive effects are not included in the calculation. With regard to the convertible notes it is assumed that these are converted in full. An adjustment is made to profit or loss (net) to eliminate interest charges, whilst allowing for effect of taxation. Regarding 28 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC construction contracts over time using the input method as Group believes this method faithfully represent the transfer of goods or services to the customer over the period of construction contract. This method places considerable importance on accurate estimates of the extent of progress towards completion and may involve estimates on the scope of deliveries and services required for fulfilling the contractually defined obligations. In addition, in determining the transaction price, the Group make significant judgment as to whether any variable consideration to be included in the contract price. The significant estimates include total contract costs, remaining costs to completion, contract price, contract risks, including technical, political and regulatory risks, and other judgments. Management of the operating divisions continually review all estimates involved in such construction contracts, including commercial feasibility, and adjusts them as necessary. Income taxes OC PLC is subject to income taxes in numerous jurisdictions. Estimates are required in determining the worldwide provision for income taxes. There are some transactions and calculations for which the ultimate tax position is uncertain during the ordinary course of business. The Group recognizes provisions for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from amounts that were initially recorded, such differences will impact the current income tax and deferred tax provisions in the period in which such determination is made. OC PLC recognizes deferred tax assets to the extent that it is probable that future taxable profits will be available for the deferred tax asset to be recovered. This is based on estimates of taxable future income by jurisdiction in which OC PLC operates and the period over which deferred tax assets are expected to be recoverable. In the event that actual results or new estimates differ from previous estimates and depending on the possible tax strategies that may be implemented, changes to the recognition of deferred tax assets could be required, which could impact the financial position and profit or loss. Asset held for sale and discontinued operations OC PLC used judgment in determining what a disposal group or a discontinued operation is and when it qualifies for reclassification according to IFRS 5 (management commitment, ready for sale / demerger, highly probable, completion within one year). In determining what is a disposal group or a discontinued operation, OC PLC judges whether the cash flows of the disposal group or a discontinued operation can be distinguished from the rest of the group, what determines a major line of operation and whether a single coordinated plan to dispose exists and at what date it was formally approved. 6. Financial risk and capital management Overview The Group has exposure to the following risks arising from financial instruments: • Credit risk • Liquidity risk • Market risk These risks arise from exposures that occur in the normal course of business and are managed on a consolidated company basis. This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Risk management framework Senior management has an overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board is responsible for developing and monitoring the Group’s risk management policies. The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by the Internal Audit Department. The Internal Audit Department undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. 29 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 6.1 Exposure to credit risk The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures. The carrying amount of financial assets represents the maximum credit exposure. With respect to transactions with financial institutions, the group sets limits to the credit worthiness rating of the counterparty. The maximum credit risk is the carrying amount of financial instruments, for an overview reference is made to the tables financial instruments by category. The major exposure to credit risk at the reporting date was as follows: $ millions Note 31 December 2021 31 December 2020 Trade and other receivables (excluding prepayments) (9) 1,494.4 1,507.5 Contract work in progress (13) 1,099.5 854.5 Cash and cash equivalents (excluding cash on hand) (14) 504.3 471.5 Total 3,098.2 2,833.5 The major exposure to credit risk for trade and other receivables by geographic region was as follows: $ millions 31 December 2021 31 December 2020 Middle East and Africa 1,110.3 1,163.0 Asia and Oceania 136.3 147.6 Europe and United States 247.8 196.9 Total 1,494.4 1,507.5 6.2 Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. This is also safeguarded by using multiple financial institutions in order the mitigate any concentration of liquidity risk. The availability of cash is monitored internally at Group level, on an ongoing basis by the corporate treasury department. In addition management prepared at closing date a cash flow projection to assess the ability of the Group to meet its obligations. The following are the contractual maturities of financial liabilities, including estimated interest payments and exclude the impact of netting arrangements. At 31 December 2020 $ millions Note Carrying amount Contractual cash flow 6 months or less 6–12 months 1–5 years Financial liabilities Loans and borrowings (18) 115.2 123.8 50.2 52.8 20.8 Trade and other payables (excluding lease obligation) (19) 1,444.0 1,444.0 1,397.8 - 46.2 Lease obligation (19) 15.9 20.1 2.9 2.9 14.3 Total 1,575.1 1,587.9 1,450.9 55.7 81.3 30 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC At 31 December 2021 $ millions Note Carrying amount Contractual cash flow 6 months or less 6–12 months 1–5 years Financial liabilities Loans and borrowings (18) 64.1 68.3 32.8 34.2 1.3 Trade and other payables (excluding lease obligation) (19) 1,568.4 1,568.4 1,527.3 - 41.1 Lease obligation (19) 12.6 19.5 2.7 2.5 14.3 Total 1,645.1 1,656.2 1,562.8 36.7 56.7 The interest on floating rate loans and borrowings is based on forward interest rates at year-end. This interest rate may change as the market interest rate changes. 6.3 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, commodity prices and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Group is exposed to foreign currency risk arising in separate ways: Foreign exchange translation exposure Due to the Group’s international presence, OC PLC’s Financial Statements are exposed to foreign exchange fluctuations as these affect the translation of the subsidiaries’ assets and liabilities presented in foreign currencies to the US dollar (the Group’s presentation currency). The currencies concerned are mainly Egyptian Pound, Algerian Dinar and Euro. Foreign exchange translation exposure is considered a part of doing business on an international level; this risk is not actively managed, nor is it hedged. OC PLC is not exposed to Saudi Riyal, UAE Dirham and Qatar Riyal. These currencies are pegged to the US dollar. Foreign exchange transaction exposure The Group entities predominantly execute their activities in their respective functional currencies. Some Group subsidiaries are, however, exposed to foreign currency risks in connection with the scheduled payments in currencies that are not their functional currencies. In general this relates to foreign currency denominated supplier payables due to project procurement, capital expenditures and receivables. The Group monitors the exposure to foreign currency risk arising from operating activities. The Group is exposed to foreign exchange transaction exposure to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the respective functional currencies of Group companies. The functional currencies of Group companies are primarily Euro, US Dollar, Egyptian Pound, Saudi Riyal, Algerian Dinar and UAE Dirham. The Group uses foreign exchange contracts to manage its foreign exchange transaction exposure. No hedge accounting is applied; therefore all fair value changes are recognised in profit and loss. The summary of quantitative data about the Group’s exposure to foreign exchange transaction exposure provided to management of the Group based on its risk management policy for the main currencies was as follows: At 31 December 2020 $ millions EUR EGP Cash and cash equivalents (including loans and borrowings) 29.5 58.6 Trade and other receivables 150.1 52.8 Trade and other payables (44.3) (15.9) 33 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 7. Property plant and equipment $ millions Land Buildings Equipment Fixtures, and fittings Under construction Total Cost 13.8 102.4 280.3 143.7 4.7 544.9 Accumulated depreciation - (40.7) (211.5) (115.5) - (367.7) At 1 January 2021 13.8 61.7 68.8 28.2 4.7 177.2 Movements in the carrying amount: Additions during the year - 3.5 38.1 13.8 17.8 73.2 Disposals - (0.7) (1.3) (0.9) - (2.9) Depreciation - (6.7) (26.7) (14.7) - (48.1) Transfers - 0.2 3.8 0.1 (4.1) - Effect of movement in exchange rates - 0.1 0.1 (0.4) - (0.2) At 31 December 2021 - (3.6) 14.0 (2.1) 13.7 22.0 Cost 13.8 104.2 313.9 147.2 18.4 597.5 Accumulated depreciation - (46.1) (231.1) (121.1) - (398.3) At 31 December 2021 13.8 58.1 82.8 26.1 18.4 199.2 ‘Property, plant and equipment’ comprise owned and leased assets: $ millions 2021 2020 Owned assets 187.7 162.2 Right of use 11.5 15.0 At 31 December 199.2 177.2 The information about ‘Right of use’ assets of the Group is presented below: $ millions Buildings Equipment Total Cost 20.4 6.3 26.7 Accumulated depreciation (7.6) (4.1) (11.7) At 1 January 2021 12.8 2.2 15.0 Movements in the carrying amount: Additions during the year 1.2 1.2 2.4 Derecognition (0.7) - (0.7) Depreciation (3.2) (2.1) (5.3) Effect of movement in exchange rates 0.1 - 0.1 At 31 December 2021 (2.6) (0.9) (3.5) Cost 20.3 7.5 27.8 Accumulated depreciation (10.1) (6.2) (16.3) At 31 December 2021 10.2 1.3 11.5 34 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 8. Goodwill $ millions Goodwill Cost 13.8 At 1 January 2021 13.8 Movements in the carrying amount: Additions - Impairment - At 31 December 2021 - Cost 13.8 Impairment - At 31 December 2021 13.8 On 31 July 2012, the Group acquired the Weitz Company LLC, a United States general contractor based in Des Moines, Iowa, resulting in USD 12.4 million of goodwill. The transaction was completed on 12 December 2012. On 2 April 2015, the Group acquired Alico resulting in USD 1.4 million of goodwill. Goodwill was tested for impairment in the 4th Quarter of 2021. No impairment was recorded in the year 2021. The impairment test is based on cash-flow projections of the five year plan. Key assumptions used in the projections are: i. Revenue growth: based on expected growth in 2022 as a result of development in backlog and expected general market growth in the USA. ii. Margin development: based on actual experience and management’s longer-term projections. The terminal value was calculated using a long-term average market growth rate of 2.5%. The estimated cash flows are discounted to their present value using a weighted average cost of capital of 6.0%. An increase or decrease of 100 basis points in the assumed WACC or the terminal growth rate would not have resulted in an impairment. 9. Trade and other receivables $ millions 31 December 2021 31 December 2020 Trade receivables (gross) 663.7 824.6 Allowance for trade receivables (10.6) (12.1) Trade receivables (net) 653.1 812.5 Trade receivables due from related parties (Note 27) 24.1 22.9 Prepayments 14.8 12.7 Other tax receivable 89.7 75.5 Supplier advanced payments 281.0 194.2 Other investments 3.5 2.3 Retentions 305.9 284.9 Other receivables 137.1 115.2 Total 1,509.2 1,520.2 Non-current 46.8 47.0 Current 1,462.4 1,473.2 Total 1,509.2 1,520.2 The carrying amount of ‘Trade and other receivables’ as at 31 December 2021 approximates its fair value. Prepayments relate for the largest part to the amounts prepaid to sub-contractors, retentions related for the largest part to amounts withheld 35 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC by customers resulting from contractual clauses. The aging of gross trade receivables at the reporting date were as follows: $ millions 31 December 2021 31 December 2020 Neither past due nor impaired 366.9 458.1 Past due 1 - 30 days 46.3 43.6 Past due 31 - 90 days 52.3 87.2 Past due 91 - 360 days 93.6 114.9 More than 360 days 104.6 120.8 Total 663.7 824.6 Management believes that the unimpaired amounts that are past due by more than 30 days are collectible in full, based on historic payment behaviour and extensive analysis of customer credit risk, including underlying customers’ credit ratings if they are available. The movement in the allowance for impairment in respect of trade receivables during the year ended 31 December 2021 was as follows: $ millions 2021 2020 At 1 January (12.1) (12.3) Provisions no longer required 1.6 1.7 Provisions formed (0.3) (2.0) Provisions used - 0.3 Other 0.2 0.2 At 31 December (10.6) (12.1) 10. Equity accounted investees The following table shows the movement in the carrying amount of the Group’s associates and joint ventures: $ millions 2021 2020 At 1 January 419.4 430.0 Share in results 27.8 (3.2) Dividends (1.9) (15.0) Disposal of investment (5.1) - Effect of movement in exchange rates (13.8) 7.6 At 31 December 426.4 419.4 The entity disclosed under ‘Equity accounted investees’ that is significant to the Group is BESIX. 38 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 11.2 Deferred income tax assets and liabilities The majority of the deferred tax assets of USD 41.1 million (31 December 2020: USD 39.0 million) relate to carried forward tax losses. The carried forward losses recognized in the statement of financial position is expected to be realized in the period 2022-2026. 12. Inventories $ millions 31 December 2021 31 December 2020 Finished goods 3.3 3.1 Raw materials and consumables 271.3 252.2 Fuels and others 6.2 5.3 Real estate 26.5 27.5 Total 307.3 288.1 During the year ended 31 December 2021, the total write-downs amount to USD 10.2 million (31 December 2020: USD 10.3 million), which all related to raw materials. The real estate relates to the land owned by Suez industrial Development Company in Egypt, which owns and develops an industrial park. 13. Contracts work in progress / billing in excess of construction contracts $ millions 31 December 2021 31 December 2020 Costs incurred on contracts (including estimated earnings) 27,342.3 24,346.1 Less: billings to date (Net) (26,542.4) (23,875.4) Total 799.9 470.7 Presented in the consolidated statements of financial position as follows: Construction work in progress - current assets 1,099.5 854.5 Billing in excess of construction contracts - current liabilities (299.6) (383.8) Total 799.9 470.7 14. Cash and cash equivalents $ millions 31 December 2021 31 December 2020 Cash on hand 1.4 2.3 Bank balances 498.9 467.1 Restricted funds 1.6 0.6 Restricted cash 3.8 3.8 Total 505.7 473.8 Restricted funds The restricted amounts mostly relate to letters of credits for OCI Saudi Arabia (USD 0.7 million) and letter of guarantee for OC Algeria (USD 0.1 million) , United Holding Company (USD 0.8 million). Restricted cash Restricted cash relates to amounts withheld in relation to amounts restricted for use for an amount of USD 3.8 million as collateral against certain loans and trade finance. 39 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 15. Share capital The movements in the number of shares (nominal value USD 1 per share) can be summarized as follows: 2021 2020 At 1 January - fully paid 116,761,379 116,761,379 At 31 December - fully paid 116,761,379 116,761,379 At 31 December (in millions of USD) 116.8 116.8 16. Reserves $ millions 2021 2020 At 1 January (289.7) (304.6) Currency translation differences (15.7) 14.9 At 31 December (305.4) (289.7) 17. Non-controlling interest 31 December 2020 $ million United Holding Company Orascom Saudi Suez Industrial Development Other individual insignificant entities Total Non-controlling interest percentage 43.5% 40.0% 39.5% Non-current assets 8.8 0.3 7.0 1.5 17.6 Current assets 40.3 100.4 21.6 3.8 166.1 Non-current liabilities - (0.8) (11.3) (0.1) (12.2) Current liabilities (22.2) (95.5) (4.7) (3.1) (125.5) Net assets 26.9 4.4 12.6 2.1 46.0 Revenue 49.5 3.3 6.9 5.9 65.6 Profit 4.2 (1.0) 2.6 0.4 6.2 Other comprehensive income 0.1 - 0.2 0.1 0.4 Total comprehensive income 4.3 (1.0) 2.8 0.5 6.6 40 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 31 December 2021 $ million United Holding Company Orascom Saudi Suez Industrial Development Other individual insignificant entities Total Non-controlling interest percentage 43.5% 40.0% 39.5% Non-current assets 5.7 - 6.9 1.7 14.3 Current assets 42.7 99.4 21.5 4.7 168.3 Non-current liabilities - (0.4) (11.1) (0.1) (11.6) Current liabilities (16.5) (96.2) (4.5) (3.7) (120.9) Net assets 31.9 2.8 12.8 2.6 50.1 Revenue 46.7 3.4 4.2 7.4 61.7 Profit 11.4 (1.6) 0.9 1.2 11.9 Other comprehensive loss (0.9) - - - (0.9) Total comprehensive income 10.5 (1.6) 0.9 1.2 11.0 18. Loans and borrowings Borrowing Company Interest rate Date of maturity Long term portion Short term portion Bank facilities Total Orascom Construction SAE Multiple rates Annual 18.5 6.5 42.6 67.6 OCI Saudi Limited Saibor + 1.80% 5/2021 - 3.6 - 3.6 Orascom Construction Industries- Algeria 1 Month TB + 6.0% 5/2021 - 1.7 - 1.7 The Weitz Group, LLC Multiple rates Multiple 1.4 15.4 - 16.8 Other Multiple rates - - 16.4 9.1 25.5 Total as of 31 December 2020 19.9 43.6 51.7 115.2 Borrowing Company Interest rate Date of maturity Long term portion Short term portion Bank facilities Total Orascom Construction SAE Multiple rates Annual - 18.6 13.6 32.2 Orascom Construction Industries- Algeria 1 Month TB + 6.0% 5/2022 - 1.6 - 1.6 The Weitz Group, LLC Multiple rates Multiple 1.2 12.7 - 13.9 Other Multiple rates - - 5.8 10.6 16.4 Total as of 31 December 2021 1.2 38.7 24.2 64.1 Information about the Group’s exposure to interest rate, foreign currency and liquidity risk is disclosed in the financial risk and capital management paragraph in Note 6. The fair value of loans and borrowings approximates the carrying amount as at the reporting date. Certain covenants apply to the aforementioned borrowings. 43 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC management and employees in critical positions or high performers. These awards will carry a 3-year vesting period. They will be focused on EBITDA, cash flow from operations and share performance. The plan is cash-settled; no transfer of equity instruments will take place under this plan. Some of the Group’s subsidiaries in the United States of America contribute to multi-employer defined benefit plans administered by unions that provide pension and post-retirement health and welfare benefits to employees, based on a defined dollar amount per hour. The Group has availed the exemption of IAS 19, para 34, to account for the contributions to these multiemployer defined benefit plans as defined contribution plans, as sufficient financial information is not publicly available with regards to these plans. The contribution to these plans for the financial year 2021 is USD 6.8 million and the expected contribution to these plans for the financial year 2022 is USD 7.0 million. The average contribution by Group’s subsidiaries to multiemployer benefit plans is assessed to be less than 5% of the total contributions of the respective plans. 22. Other income $ millions 31 December 2021 31 December 2020 Net gain on sale of property, plant and equipment 3.4 1.7 Other income 0.7 16.2 Other expenses (1.8) (3.7) Total 2.3 14.2 23. Net finance cost $ millions 31 December 2021 31 December 2020 Interest income on financial assets measured at amortized cost 8.4 13.5 Foreign exchange gain 3.2 7.8 Finance income 11.6 21.3 Interest expense on financial liabilities measured at amortized cost (20.6) (22.8) Fair value loss on derivatives - (1.6) Foreign exchange loss (7.3) (6.7) Finance cost (27.9) (31.1) Net finance cost recognized in profit or loss (16.3) (9.8) The above finance income and finance cost include the following interest income and expense in respect of assets (liabilities) not measured at fair value through profit or loss: $ millions 31 December 2021 31 December 2020 Total interest income on financial assets 8.4 13.5 Total interest expense on financial liabilities (20.6) (22.8) 24. Earnings per share i. Basic 31 December 2021 31 December 2020 Net profit attributable to shareholders (1 million USD) 113.4 90.9 Number of ordinary share (million) 116.8 116.8 Basic earnings per ordinary share (USD) 0.97 0.78 44 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 25. Segment reporting The Group determines and presents operating segments on the information that internally is provided to the Chief Executive Officer during the period. The Group has three reportable segments, as described below. Each of the segments is managed separately because they require different operating strategies and use their own assets and employees. Factors used to identify the Group’s reportable segments, are a combination of factors and whether operating segments have been aggregated and types of products and services from which each reportable segment derives its revenues. Business information for 31 December 2020 $ millions MENA USA Besix Total Total revenue 2,107.3 1,263.8 - 3,371.1 Share in loss of equity accounted investees (2.3) 5.3 (6.2) (3.2) Depreciation and amortization (39.8) (7.4) - (47.2) Interest income 13.1 0.4 - 13.5 Interest expense (22.5) (1.9) - (24.4) Profit before tax 134.4 9.4 (6.2) 137.6 Investment in PP&E 40.5 5.2 - 45.7 Non-current assets 240.4 73.1 382.9 696.4 Total assets 2,930.8 474.8 382.9 3,788.5 Total liabilities 2,742.0 404.6 - 3,146.6 Business information for 31 December 2021 $ millions MENA USA Besix Total Total revenue 2,492.8 1,050.1 - 3,542.9 Share in income of equity accounted investees 6.8 5.3 15.7 27.8 Depreciation and amortization (41.1) (7.0) - (48.1) Interest income 8.4 - - 8.4 Interest expense (18.8) (1.8) - (20.6) Profit before tax 135.7 16.4 15.7 167.8 Investment in PP&E 66.8 6.4 - 73.2 Non-current assets 262.5 75.9 388.9 727.3 Total assets 3,270.6 442.9 388.9 4,102.4 Total liabilities 3,044.5 368.8 - 3,413.8 Segment revenues have been presented based on the location of the entity which is managing the contracts. BESIX is presented as part of ‘equity accounted investees’, therefore in the above schedule only the income from equity accounted investees and the asset value are reflected. For further information with respect to liabilities, revenues and cost, reference is made to note 10. The geographic information above analysis the Group’s revenue and non-current assets by the Company where the activities are being operated. The Orascom Construction Group has customers that represent 10 percent or more of revenues: Percentage 31 December 2021 31 December 2020 Egyptian Government 56.8% 52.2% 45 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC 26. Contingencies 26.1 Contingent liabilities 26.1.1 Letters of guarantee / letters of credit Letters of guarantee issued by banks in favor of others as at 31 December 2021 amount to USD 2,126.0 million (31 December 2020: USD 1,773.1 million). Outstanding letters of credit as at 31 December 2021 (uncovered portion) amount to USD 91.9 million (31 December 2020: USD 75.3 million). Certain of our sub-holdings have put general performance guarantees for the execution of more significant projects by our subsidiaries. As of 31 December 2021, mechanic liens have been received in respect of one of our US project for a total of USD 7.3 million (31 December 2020: USD 5.0 million). 26.1.2 Litigations and claims In the ordinary course of business, the Group entities and joint ventures are involved in some arbitration or court cases as defendants or claimants. These litigations are carefully monitored by the entities’ management and legal counsels, and are regularly assessed with due consideration for possible insurance coverage and recourse rights on third parties. In cases where it is probable that the outcome of the proceedings will be unfavourable, and the financial outcome can be measured reliably, a provision has been recognized in the financial statements which is disclosed in note 20 ‘Provisions’. It should be understood that, in light of possible future developments, such as: (a) potential additional lawsuits, (b) possible future settlements, and (c) rulings or judgments in pending lawsuits, certain cases may result in additional liabilities and related costs. At this point in time, OC PLC cannot estimate any additional amount of loss or range of loss in excess of the recorded amounts with sufficient certainty to allow such amount or range of amounts to be meaningful. While the outcome of said the cases, claims and disputes cannot be predicted reliably, we believe, based upon legal advice and information received, that the final outcome will not materially affect our consolidated financial position of as at 31 December 2021 but could be material to our results of operations or cash flows in any one accounting period. The Group is also a party to certain potential claims from customer and, where necessary, makes adequate provisions against any potential claims. Such provisions are reassessed regularly to include significant claims and instances of potential litigations. Based on the review of opinion provided by the legal advisors / internal legal team, management is of the opinion that no material cash outflow in respect of these claims is expected to be paid by the Group in these legal cases over and above the existing provision recognized as of the reporting date. The Group has elected not to present the complete disclosures as required by IAS 37 “Provision and Contingent Liabilities and Contingent Assets” as management is of the view that since legal claims are sub-judice and are disputed; therefore this information may be prejudicial to their position on these matters. Certain other contingent liabilities may arise during the normal course of business, which based on the information presently available, either cannot be quantified at this stage of in the opinion of the management is without any merit. However, in the opinion of management, these contingent liabilities are not likely to result in any cash outflows for the Group. 26.1.3 Sidra Medical Center The contract for the design and build of the Sidra Medical and Research Centre in Doha, Qatar, was awarded by the Qatar Foundation for Education, Science & Community Development (the “Foundation”) in February 2008 to the associate owned by Obrascón Huarte Lain (55%) and Contrack Cyprus Limited (45%), for a total contract value of approximately USD 2.4 billion. The project was more than 95% complete and is not part of the Construction Group’s backlog as the project is accounted for under the equity method. In July 2014, the consortium received a Notice of Termination from the Foundation. On 23 July 2014, the Foundation commenced arbitration proceedings against the associate by serving a Request for Arbitration with the ICC (seat in London) dated 23 July 2014. Since 2014, several hearings and expert meetings took place and partial awards have been issued by the tribunal. The most recent hearings were held in May 2021 and June 2021. The main evidentiary hearing is ongoing and expected to be completed by April 2022. The final award is not expected before Q3 2022. In August 2017, the Foundation again served a Request for Arbitration, this time in parallel proceedings against OCI SAE with the ICC (seat in London). The claims made by the Foundation in this new arbitration arise in connection with a Parent Company Guarantee (the “PCG”) issued by OCI SAE on 7 February 2008. The Foundation alleged that the terms of the PCG protect it in respect of liabilities and obligations of Contrack (Cyprus) Limited on the Project. This arbitration is on hold since March 2020 pending decision in the main arbitration in the 48 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC Furthermore, the Sawiris Foundation for Social Development also provides grants to fund projects implemented by charitable organizations, educational institutions, local government and private business. 28. Remuneration of the Board of Directors (Key management personnel) During the year ended 31 December 2021, we considered the members of the Board of Directors (Executive and Non-executive) and the senior management to be the key management personnel as defined in IAS 24 ‘Related parties’. The total remuneration of the key- management personnel for the year ended 31 December 2021 amount to approximately USD 13.0 million. 29. List of principal subsidiaries, associates and joint ventures Companies Country Percentage of interest Consolidation method Cementech Limited BVI 100.00 Full Orascom Construction Industries Algeria Spa Algeria 99.90 Full IMAGRO Construction SRL Italy 49.90 Full BESIX Group SA Belgium 50.00 Equity Aluminium & Light Industries Co Ltd Egypt 100.00 Full OCI Construction Limited Cyprus 100.00 Full Orascom Construction Egypt 100.00 Full Orascom Road Construction Egypt 99.98 Full Orasqualia for the Development of the Wastewater Treatment Plant Egypt 50.00 Equity National Steel Fabrication Egypt 99.90 Full Suez Industrial Development Company Egypt 60.50 Full Orascom Saudi Company Kingdom of Saudi Arabia 60.00 Full Contrack Watts Inc USA 100.00 Full Orascom E&C USA USA 100.00 Full Orascom Construction USA Inc USA 100.00 Full Orascom Investments Netherlands 100.00 Full The Weitz Group LLC USA 100.00 Full Orascom for Wind Energy Egypt 100.00 Full Furthermore, OC PLC has various holding companies in the Netherlands and the countries it operates in. On 26 January 2021, the interim dividend of USD 0.21 per share which has been approved by board of directors' on 30 December 2020 amounting to USD 24.5 million had been paid. On 19 May 2021,the shareholders’ at the Annual General Meeting had approved a dividend of USD 0.2313 per share amounting to USD 26.7 which had been paid in 10 August 2021. On 6 December 2021, the board of directors’ has approved an interim dividend of USD 0.2313 per share amounting to USD 27.0 which has been paid in 31 January 2022, bringing total dividends announced in FY 2021 to USD 0.4626 per share. 30. Subsequent Event The Shareholders of Orascom Construction PLC , in the Extraordinary General Meeting held on 27 December 2021, approved the acquisition of 100% of the total share capital of Orascom Trading (S.A.E), National Equipment Company (S.A.E) and Orascom Free Zone - Onsi Sawiris and Partners (Limited Partnership Company), together referred to the “Services” Group, for a total cash consideration of USD 35,000,000 (United States Dollars thirty-five million). The execution of the sale and purchase agreement(s) and other required legal documents were completed subsequent to year-end. The “Services” entities are leading companies in the Egyptian market working in the field of commercial agencies of equipment. 31. Impact of COVID-19 The coronavirus outbreak since early 2020 has brought additional uncertainties in the Group’s operating environment and continue to impact the Group’s operations in the areas we operate in, with our main activities in Egypt and USA. The Group has formed a Crisis Management Committee to ensure the safe and stable continuation of its business operations which include measures to address and mitigate any identified key operational and financial issues. These contingency measures include amongst others communication plans with our clients, 49 Orascom Construction PLC Year Ended Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Orascom Construction PLC mitigation plans at project level to minimize the impact of possible slowdowns, if any, and measures to safeguard the welfare of our employees and subcontractor staff at our project sites and offices. Our major projects in Egypt and USA have remained operational throughout the period with minimum disruption based on the initiatives implemented by the Group and supported by the mandates issued by the respective governments. We have also put in place effective business continuity and remote working plans enabled by the right technologies and systems to ensure uninterrupted operations across the Group. Based on our assessment of the COVID-19 impact, there are no significant impact in its financial position and performance as at and for the year ended 31 December 2021. Further, we concluded that significant changes are not required as of 31 December 2021 in its key accounting judgements and estimates from those applied in the last annual consolidated financial statements as of 31 December 2020. Furthermore, we continue to assess the level of future credit-lines and whether additional lines need to be made available to manage our liquidity. The Group will keep these contingency measures under review as the situation is fast evolving, the effect of the outbreak is by nature subject to certain degree of uncertainty. Dubai, UAE, 21 March 2022 The Orascom Construction PLC Board of Directors, Jérôme Guiraud Chairman Osama Bishai Chief Executive Officer Sami Haddad Member Johan Beerlandt Member Wiktor Sliwinski Member Nada Shousha Member ORASCOM CONSTRUCTION PLC (the Company) Summary of the Board Resolutions A meeting of the board of directors of the Company was held on 21 March 2022. After due and careful consideration, IT WAS RESOLVED that: (a) that the financial statements of the Company for the period ended 31 December 2021 be approved. (b) in accordance with the Egyptian Exchange’s Board of Directors requirements, that Hesham Faisal Selim El Halaby continues his current appointment as Investor Relations Director, which would be reflected in the associated registries generated by the Egyptian Exchange. KPMG LLP Unit No. 819, Liberty House DIFC, P.O. Box 3800 Dubai, United Arab Emirates Tel. +971 (4) 403 0300, www.kpmg.com/ae KPMG LLP, a limited liability partnership incorporated and licensed in the Dubai International Financial Center, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. KPMG LLP is registered with the Dubai Financial Services Authority. 1 Independent auditors’ report To the Shareholders of Orascom Construction PLC Opinion We have audited the separate financial statements of Orascom Construction PLC (“the Company”), which comprise the separate statement of financial position as at 31 December 2021, the separate statements of profit or loss and other comprehensive income, changes in equity and cashflows for the year then ended, and notes, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying separate financial statements present fairly, in all material respects, the unconsolidated financial position of the Company as at 31 December 2021, and of its unconsolidated financial performance and its unconsolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with International Ethics Standards Board for Accountants International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the separate financial statements in the Dubai International Financial Centre (“DIFC”) and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate financial statements of the current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. KPMG LLP, a limited liability partnership incorporated and licensed in the Dubai International Financial Center, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. KPMG LLP is registered with the Dubai Financial Services Authority. 2 Orascom Construction PLC Independent Auditors’ Report 31 December 2021 Key Audit Matters (continued) 1 Impairment of investment in subsidiaries Refer to note 8 of the separate financial statements Key audit matter Impairment of investment in subsidiaries is an area that involves significant management judgment and requires an assessment as to whether the carrying value of the subsidiaries can be supported by their value in use based on their current and expected future operations. To assess whether an impairment exists in the carrying value of the Company’s subsidiaries, management is required to assess whether events or changes in circumstances indicate that their carrying value may not be recoverable. Factors that are considered important which could trigger an impairment review include evidence that no sufficient profits or cash flows will be generated from the related investment. The assessment process is complex and highly judgmental and is based on assumptions that are affected by expected future market or economic conditions. Due to the significance of the carrying value of the investment in subsidiaries in the Company’s financial statements and the inherent uncertainties associated with estimating future cash flows, the appropriate discount rates and growth rates, the impairment of investment in subsidiaries was concluded as a key audit matter. How our audit addressed the key audit matter Our audit procedures included the following: • We reviewed management’s impairment analysis, including the assumptions and estimates used in developing the model. To test the accuracy of the model, we re- performed the calculations prepared by management; • We assessed the historical accuracy of the management’s forecasting and challenged the significant assumptions and critical areas of judgment; • We involved our specialists in assessing and evaluating the appropriateness of the discount rate and terminal growth rate used by management in the impairment assessment; • We assessed the management’s approach in the identification of the cash generating unit (“CGU”), the allocation of assets to each CGU and the methodology adopted in the impairment assessment with reference to the requirements of the prevailing accounting standards; • We performed sensitivity analysis on significant assumptions used in the model, including the discount rates and terminal growth rates; and • We assessed the adequacy of the disclosures in the separate financial statements. KPMG LLP, a limited liability partnership incorporated and licensed in the Dubai International Financial Center, and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. KPMG LLP is registered with the Dubai Financial Services Authority. 3 Orascom Construction PLC Independent Auditors’ Report 31 December 2021 Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error. In preparing the separate financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with Governance are responsible for overseeing the Company's financial reporting process. Auditors’ Responsibilities for the Audit of the Separate Financial Statements Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: — Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. — Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. — Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Orascom Construction PLC Separate statement of financial position As at 31 December 2021 2021 2020 Note USD USD Non-current assets Investment in subsidiaries & 787,817,170 787,817,170 787,817,170 787,817,170 Current assets Prepayments and other receivables 9 417,270 379,222 Due from related parties dl 454,290 901,827 Cash at banks 10 2,952,798 13,873,051 3,824,358 15,154,100 Total assets 791,641,528 802,971,270 Shareholder’s equity and liabilities Shareholder’s equity Share capital 13 116,761,379 116,761,379 Share premium 483,025,196 483,025,196 Retained earnings 52,156,911 125,319,855 651,943,486 725,106,430 Non-current liability Loans due to related parties il 98,973,776 41,690,724 Current liabilities Accounts payable and accrued expenses i2 3,822,494 4,001,079 Dividends payable 14 27,006,907 24,519,890 Due to related parties il 9,894,865 7,653,147 40,724,266 36,174,116 Total liabilities 139,698,042 77,864,840 Total liabilities and shareholder’s equity 791,641,528 802,971,270 The notes op-pages 9 to 29 form an integral part of these separate financial statements. These sep: financial st: ents were approved by the Board of Directors and authorised for issue on Director Director The independent auditors’ report is set out on pages I to 4. 7 Orascom Construction PLC Separate statement of cash flows for the year ended 31 December 2021 2021 2020 Note USD USD Operating activities Loss for the year (19,430,786) (7,400,593) Adjustments for: Finance expenses 7 5,459,451 4,119,480 Gain on waiver of a related party loan 11(i) (1,000,000) (600,000) Finance income 6 (1,721,440) (2,345,955) Reversal of impairment loss on loans and amounts due from related parties, net 11(ii) (969,252) (8,706,841) -------------- ------------- (17,662,027) (14,933,909) Change in prepayments and other receivables (38,048) 1,395,287 Change in due from related parties (3,831,367) (1,537,199) Change in accounts payable and accrued expenses (178,585) 1,923,080 Change in due to related parties 2,241,718 1,569,240 ------------- -------------- Net cash used in operating activities (19,468,309) (11,583,501) ------------- -------------- Investing activities Additional loan given to a related party (5,180,547) (1,306,989) Collections from related parties loan 12,000,000 32,731,779 Finance income received 78,416 1,306,989 ------------ -------------- Net cash generated from investing activities 6,897,869 32,731,779 ------------ -------------- Financing activities Proceeds from loans given by related party 61,387,427 18,749,107 Repayment of loans to related parties (8,429,676) (153,032) Finance expense paid (62,423) (1,814,371) Dividends paid 14 (51,245,141) (24,519,890) ------------- -------------- Net cash generated from / (used in) financing activities 1,650,187 (7,738,186) ------------ -------------- Net (decrease) / increase in cash and cash equivalents (10,920,253) 13,410,092 Cash and cash equivalents at the beginning of the year 10 13,873,051 462,959 ------------- -------------- Cash and cash equivalents at the end of the year 2,952,798 13,873,051 ======= ======== The notes on pages 9 to 29 form an integral part of these separate financial statements. The independent auditors’ report is set out on pages 1 to 4. 8 Orascom Construction PLC Separate statement of changes in equity for the year ended 31 December 2021 Share capital Share premium Retained earnings Total USD USD USD USD At 1 January 2020 116,761,379 483,025,196 181,760,228 781,546,803 Total comprehensive income for the year Loss for the year - - (7,400,593) (7,400,593) Transactions with owners, recognised directly in equity Dividends declared (refer note 14) - - (49,039,780) (49,039,780) --------------- --------------- --------------- --------------- Balance at 31 December 2020 116,761,379 483,025,196 125,319,855 725,106,430 ========= ========= ========= ========= At 1 January 2021 116,761,379 483,025,196 125,319,855 725,106,430 Total comprehensive income for the year Loss for the year - - (19,430,786) (19,430,786) Transactions with owners, recognised directly in equity Dividends declared (refer note 14) - - (53,732,158) (53,732,158) --------------- --------------- -------------- --------------- Balance at 31 December 2021 116,761,379 483,025,196 52,156,911 651,943,486 ========= ========= ======== ========= The notes on pages 9 to 29 form an integral part of these separate financial statements. Orascom Construction PLC Notes (continued) 11 3 Significant accounting policies (continued) Financial instruments (continued) ii. Classification and subsequent measurement (continued) Financial assets (continued) A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: - it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis. All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Financial assets – Business model assessment The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management. The information considered includes: - the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets; - how the performance of the portfolio is evaluated and reported to the Company’s management; - the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; - how managers of the business are compensated – e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and - the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity. Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Company’s continuing recognition of the assets. Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL. Orascom Construction PLC Notes (continued) 12 3 Significant accounting policies (continued) Financial instruments (continued) ii. Classification and subsequent measurement (continued) Financial assets – Assessment whether contractual cash flows are solely payments of principal and interest For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin. In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers: - contingent events that would change the amount or timing of cash flows; - terms that may adjust the contractual coupon rate, including variable-rate features; - prepayment and extension features; and - terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse features). A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition. Financial assets – Subsequent measurement and gains and losses Financial assets at FVTPL These assets are subsequently measured at fair value. Net gains or losses, including any interest or dividend income, are recognized in profit or loss. Financial assets at amortized cost These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment losses are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. Orascom Construction PLC Notes (continued) 13 3 Significant accounting policies (continued) Financial instruments (continued) ii. Classification and subsequent measurement (continued) Financial liabilities – Classification, subsequent measurement and gains and losses Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. iii. Derecognition Financial assets The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. The Company enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised. Financial liabilities The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss. iv. Offsetting Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. Orascom Construction PLC Notes (continued) 16 3 Significant accounting policies (continued) Impairment (continued) i. Non-derivative financial assets (continued) Non-financial assets (continued) Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Investment in subsidiaries Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Investment in subsidiaries is stated at cost less any provision for impairment, if any. Share premium and treasury shares Share premium is the excess amount received over the par value of the shares. Incremental costs directly attributable to the issue of new shares are recognised in equity as a deduction, net of tax, from the proceeds. When ordinary shares are repurchased, the amount of the consideration paid, which includes directly attributable costs, net of tax effects, is classified as treasury shares on the statement of changes in equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in ‘Treasury shares’, and the resulting surplus or deficit on the transaction is presented in share premium. Retained earnings The amount included in retained earnings includes accumulated profits and reduced by dividends, and also include transfers of share premium. Dividends are recognised as a liability and deducted from equity when they are approved by the Company’s shareholders. Dividends for the year that are approved after the reporting date are dealt with as an event after the reporting date. Retained earnings may also include effect of changes in accounting policy as may be required by the standard’s transitional provisions. Finance income Finance income include interest income on loans due from related parties, net foreign exchange gain and interest in bank balances. Interest income is recognised as it accrues, using the effective interest rate method. Finance expense Finance expense include loss on foreign currency exchange forward contract, net foreign currency exchange loss, interest expense on loans due to related parties, interest expense on bank borrowings, and bank charges. Interest expense is recognised as it accrues, using the effective interest rate method. Orascom Construction PLC Notes (continued) 17 3 Significant accounting policies (continued) Cash and cash equivalents Cash and cash equivalents comprise bank balances, bank borrowings and deposits with maturities of three months or less from the acquisition date (original maturity) that are subject to an insignificant risk of changes in their fair value and are used by the Company in the management of its short-term commitments. Provisions A provision is recognised in the statement of financial position when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Foreign currencies Transactions in foreign currencies are translated into functional currency of the Company at the exchange rates at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or loss. Leases At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: - the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; - the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and - the Company has the right to direct the use of the asset. The Company has this right when it has the decision- making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either: i. the Company has the right to operate the asset; or ii. the Company designed the asset in a way that predetermines how and for what purpose it will be used. The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. Orascom Construction PLC Notes (continued) 18 3 Significant accounting policies (continued) Leases (continued) The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, and the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise the following: - fixed payments, including in-substance fixed payments; - variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; - amounts expected to be payable under a residual value guarantee; and - the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of- use asset has been reduced to zero. The Company presents right-of-use assets in ‘property and equipment’ and lease liabilities in ‘trade and other payables’ in the statement of financial position. Short term leases and leases of low-value assets The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. 4 Financial risk management and capital management Overview The Company has exposure to the following risks from its use of financial instruments: • Credit risk; • Liquidity risk; and • Market risk. Orascom Construction PLC Notes (continued) 21 8 Investment in subsidiaries 2021 2020 USD USD Orascom Holding Cooperatief U.A. (refer to note (i) below) 930,297,276 930,297,276 Orascom Holding Limited 50,000 50,000 --------------- --------------- 930,347,276 930,347,276 Less: Provision for impairment (142,530,106) (142,530,106) --------------- --------------- 787,817,170 787,817,170 ========= ========= (i) On 31 December 2021, management assessed the recoverable amount of its investment in Orascom Holding Cooperatief U.A. (“OHC”). The impairment assessment was performed taking into consideration OHC and its downstream subsidiaries as a single Cash Generating Unit (“CGU”). The recoverable amount of the investment in subsidiary was estimated based on its value in use, by aggregating the present value of net cash flows of each segment within the OHC Group. In arriving at the estimated cash flows, the following post-tax discount and terminal growth rates were used. 2021 2020 Segment Post – tax discount rate Terminal growth rates Post– tax discount rate Terminal growth rates Middle and North Africa Region (MENA Region) 15.0% 2.5% 15.0% 8.0% United States of America Region (USA Region) 6.0% 2.5% 6.0% 2.4% BESIX 7.0% 2.5% 7.0% 2.4% Based on the management’s assessment, there is no impairment as of 31 December 2021 (2020: nil). 9 Prepayments and other receivables 2021 2020 USD USD Prepayments 361,765 319,879 Deposits 55,505 59,343 ---------- ------------ 417,270 379,222 ====== ======= Orascom Construction PLC Notes (continued) 22 10 Cash at banks 2021 2020 USD USD Current account 2,952,798 5,720,359 Deposits (refer to note(i) below) - 8,152,692 ------------ -------------- 2,952,798 13,873,051 ======= ======== (i) Deposits having original maturity of three months or less carry interest at nominal commercial rates 11 Related party transactions and balances The Company, in the ordinary course of business, enters into transactions with other business enterprises that fall within the definition of a related party contained in International Accounting Standard No. 24. These transactions are carried out at mutually agreed rates. The significant transactions with related parties during the year are as follows: 2021 2020 USD USD Interest income on loans due from related parties (refer note 6) 571,297 2,345,955 Expenses incurred by related parties on behalf of the Company 4,761,520 3,260,179 Expenses recharged from a related party (refer to note 5) 1,769,772 1,085,103 Interest expense on loans due to related parties (refer note 7) 5,397,028 620,633 Gain on waiver of related party loan (see note (i) below) 1,000,000 600,000 ======= ====== (i) The Company obtained a loan from Cementech Limited, a related party, amounting to USD 1 million (2020: USD 0.6 million). Based on the intercompany loan settlement agreement between the Company and Cementech Limited, the full loan amount of USD 1 million (2020: USD 0.6 million) was waived off during the year, and accordingly, a gain on waiver of a related party loan was recognized in the statement of profit or loss. Key management remuneration The Company considers the members of the Board of Directors (Executive and Non-executive), and the senior management to be the key management personnel of the Company. The remuneration of the key management for the year is as follows: 2021 2020 USD USD Board remuneration 600,000 550,000 ====== ====== Orascom Construction PLC Notes (continued) 23 11 Related party transactions and balances (continued) 2021 2020 Current portion Non-current portion Total Current portion Non-current portion Total Relationship Interest terms Repayment terms USD USD USD USD USD USD Loans due from related parties OCI Saudi Arabia Subsidiary refer note (a) receivable on 31 December 2025 - 11,706,980 11,706,980 17,451,188 - 17,451,188 Orascom Holding Cooperatief U.A. Subsidiary refer note (b) receivable on 31 December 2025 - 10,727,478 10,727,478 - 10,231,426 10,231,426 ------------- -------------- -------------- ------------- --------------- --------------- - 22,434,458 22,434,458 17,451,188 10,231,426 27,682,614 Less: Impairment loss on loans due from related parties (refer to note 11(ii)) - (22,434,458) (22,434,458) (17,451,188) (10,231,426) (27,682,614) -------------- -------------- -------------- -------------- -------------- -------------- - - - - - - ======== ======== ======== ======== ======== ======== Due from related parties Orascom Holding Limited Subsidiary no interest receivable on demand 70,121,833 - 70,121,833 65,933,107 - 65,933,107 Orascom Saudi Subsidiary no interest receivable on demand 424,654 - 424,654 424,654 - 426,654 Cementech Limited Subsidiary no interest receivable on demand 270,178 - 270,178 180,000 - 180,000 OCI Saudi Arabia Subsidiary no interest receivable on demand 29,636 - 29,636 29,950 - 29,950 Fertiglobe Holding Limited Related party via key management personnel no interest receivable on demand - - - 230,258 - 230,258 The Weitz Company, LLC Subsidiary no interest receivable on demand - - - 216,965 - 216,965 -------------- ------- -------------- ---------- ------- ---------- 70,846,301 - 70,846,301 67,014,934 - 67,014,934 Less: Impairment loss on amounts due from related parties (refer to note 11(ii)) (70,392,011) - (70,392,011) (66,113,107) - (66,113,107) ------------- 454,290 ------- - ------------- 454,290 ------------- 901,827 ------- - ------------- 901,827 ====== ==== ====== ====== ==== ====== Loans due to related parties Orascom Construction SAE Subsidiary refer note (c) payable on 30 March 2025 - 77,576,411 77,576,411 - 18,738,707 18,738,707 OCI Construction Limited Subsidiary refer note (d) payable on 31 December 2025 - 17,463,461 17,463,461 - 19,023,941 19,023,941 NSF Global Limited. Subsidiary refer note (e) payable on 31 December 2025 - 3,933,904 3,933,904 - 3,928,076 3,928,076 ------- -------------- -------------- ------- -------------- -------------- - 98,973,776 98,973,776 - 41,690,724 41,690,724 ==== ======== ======== ==== ======== ======== Due to related parties Contrack International Inc. USA Subsidiary no interest payable on demand 7,401,321 - 7,401,321 6,233,197 - 6,233,197 Orascom E&C Subsidiary no interest payable on demand 1,757,273 - 1,757,273 770,736 - 770,736 Orascom Holding Cooperatief U.A. Subsidiary no interest payable on demand 649,214 - 649,214 649,214 - 649,214 The Weitz Company, LLC Subsidiary no interest payable on demand 87,057 - 87,057 - - - ------------ ------- ------------ ------------ ------- ------------ 9,894,865 - 9,894,865 7,653,147 - 7,653,147 ======= ==== ======= ======= ==== ======= Orascom Construction PLC Notes (continued) 26 15 Financial instruments (continued) Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows: 2021 2020 USD USD Cash at banks 2,952,798 13,873,051 Due from related parties 454,290 901,827 Deposits 55,505 59,343 ------------ -------------- 3,462,593 14,834,221 ======= ======== Management believes that the amounts due from related parties amounting to USD 454,290 are fully recoverable and accordingly, no provision for impairment was made. The Company’s cash is placed with banks of repute. Liquidity risk The following are the contractual maturities of financial liabilities including estimated interest payments and excluding the impact of netting arrangements: Carrying Contractual 1 year More than amount cash flows or less 1 year USD USD USD USD 31 December 2021 Non-derivative financial liabilities Loans due to related parties 98,973,776 132,492,617 - 132,492,617 Due to related parties 9,894,865 9,894,865 9,894,865 - Dividends payable 27,006,907 27,006,907 27,006,907 - Accounts payable and accrued expenses 3,822,494 3,822,494 3,822,494 - --------------- --------------- -------------- --------------- 139,698,042 173,216,883 40,724,266 132,492,617 ========= ========= ======== ========= 31 December 2020 Non-derivative financial liabilities Loans due to related parties 41,690,724 46,739,734 - 46,739,734 Due to related parties 7,653,147 7,653,147 7,653,147 - Dividends payable 24,519,890 24,519,890 24,519,890 - Accounts payable and accrued expenses 4,001,079 4,001,079 4,001,079 - -------------- -------------- ------------ -------------- 77,864,840 82,913,850 36,174,116 46,739,734 ======== ======== ======= ======== Orascom Construction PLC Notes (continued) 27 15 Financial instruments (continued) Interest rate risk At the reporting date, the interest rate profile of the Company’s interest-bearing financial instruments was: Variable rate instruments 2021 2020 USD USD Financial liabilities (98,973,776) (41,690,724) ======== ======== Cash flow sensitivity analysis for variable rate instruments An increase of 100 basis points in interest rates at the reporting date would have increased/ (decreased) net profit by the amounts shown below. This analysis assumes that all other variables remain constant: 2021 2020 100 bp Increase 100 bp Decrease 100 bp Increase 100 bp Decrease USD USD USD USD Variable rate instruments (989,738) 989,738 (416,907) 416,907 ====== ====== ====== ====== Currency risk The Company’s exposure to foreign currency risk as at reporting date is as follows: 2021 Euro Egyptian pound Cash at banks 2,064 197,624 Loans due to related parties (15,359,650) (1,219,371,439) -------------- ----------------- (15,357,586) (1,219,173,815) ======== ========== 2020 Euro Egyptian pound Cash at banks 1,220 1,526,185 Loans due to related parties (15,468,379) (294,958,297) -------------- --------------- (15,467,159) (293,432,112) ======== ========= Orascom Construction PLC Notes (continued) 28 15 Financial instruments (continued) Currency risk (continued) Sensitivity Analysis The following foreign exchange rates are applied by the Company during the year: Average rate Spot rate Average rate Spot Rate 2021 2021 2020 2020 1 Euro 1.1836 1.1370 1.1449 1.2299 1 Egyptian pound 0.0637 0.0636 0.0632 0.0635 ===== ===== ===== ===== 1% strengthening of the USD against the Egyptian Pound and Euro at 31 December would have increased / (decreased) the net profit by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant: 2021 2020 USD USD Euro (174,616) (190,231) Egyptian pound (775,394) (186,329) ---------- --------- (950,010) (376,560) ====== ===== 16 Operating segments There were no operating segments identified by the management as at the reporting date. 17 Contingent liabilities and capital commitments There were no contingent liabilities as of the reporting date (2020: nil). Further, there were no capital commitments as at the reporting date. (2020: nil) 18 Significant accounting estimates and judgements The Company makes estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Impairment of investment in subsidiaries The Company determines whether investment in subsidiaries is impaired on an annual basis or whenever there is any indication of impairment. This requires estimation of the “value in use” of the cash generating units. Estimating a value in use amount requires management to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount rate in order to calculate the present value of these cash flows.