his highness emir of the state of qatar - aamal/media/files/a/aamal-v2/reports...growth as the...

2 A A M A L A N N U A L R E P O R T 1 2

His Highness

Sheikh HamadBin Khalifa Al-ThaniEmir of the State of Qatar

3A A M A L A N N U A L R E P O R T 1 2

His Highness

Sheikh Tamim Bin HamadBin Khalifa Al-ThaniHeir Apparent


Company Profile

Financial Highlights

Investment Rationale

Chairman’s Statement

Vice Chairman’s Report

Managing Director’s Report

Corporate Governance

Board of Directors

Executive Management

General Managers

Organisational Chart

Functional Chart

Corporate Social Responsibility

Operations Review

Financial Statementscont

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Company Profile“Generating revenues of QAR 2,283.9m (US$625.7m) in 2012, Aamal Company is one of the largest, most diversified and fastest-growing companies in Qatar offering investors a high quality and balanced exposure to the remarkable Qatar growth story”

Company Snapshot• Incorporated in 2001 in Qatar and listed on the Qatar Exchange in 2007.

• Geographical focus, at present, on Qatar with intentions to expand further in the region and beyond.

• Operations across 21 business units with market leading positions in the following key sectors: industrial manufacturing, retail, property, managed services, medical equipment and pharmaceuticals.

• Strategy focused on 3 pillars for sustained, profitable growth:

* Increased focus on industrial manufacturing and related high growth sectors.

* Continued growth, diversification and innovation across other existing businesses to enhance market position and optimise performance.

* Continued application of clear and disciplined operational and financial principles underlying strategic growth initiatives.

• Uniquely positioned to benefit from increased private and public sector demand, particularly infrastructure development, as Qatar is transformed into an advanced and self-sustaining economy; the award of the 2022 FIFA World Cup to Qatar is anticipated to accelerate this capital investment as infrastructure projects are resumed and new projects come on stream.

• Current market capitalisation of QAR 8.7bn* (US$2.3bn), making Aamal Company one of the largest diversified companies listed on the Qatar Exchange.

• Al Faisal Holding Company is the major shareholder.

* As at 18 of April 2013


Industrial Manufacturing

Trading and Distribution

Property

Managed Services

3%

*Net Profit by Division 2012

* Pre head office costs and fair value gains on investment properties

61%

18%

19%

2%

*Revenue by Division 2012

* Pre deduction of inter divisional revenue

23%

64%

10%

Financial HighlightsQARm FY 2012 FY 2011 FY 2010Revenue 2,283.9 1,910.1 1,217.1Revenue growth % 19.6% 56.9% 72.6%Gross Profit 446.3 441.7 383.1Gross Profit Margin % 19.5% 23.1% 31.4%Net Profit Before Value Gains on Investment Properties 235.7 246.0 232.8Net Profit Margin Before Fair Value Gain % 10.3% 12.9% 19.1%Fair Value Gains on Investment Properties 388.8 287.6 329.0Net Profit 624.5 533.7 561.9Reported EPS 1.09 0.90 1.17Adjusted EPS* 0.38 0.38 0.36*EPS adjusted to show underlying profitability (i.e. excluding fair value gains on investment properties)

2012: Revenue and Net Profit breakdown by division (QARm)

Division Revenue(1) Net Profit Before Fair Value Gains on Investment Properties(2)

Industrial Manufacturing 1,505.7 56.7Trading and Distribution 533.6 54.4Property 234.3 181.8Managed Services 84.6 7.4Total 2,358.2 300.3(1) Revenue shown before deduction of inter divisional revenue(2) Net Profit shown before deduction of Head Office costs


Investment Rationale1) A powerful, cohesive growth platform

•One of the fastest growing diversified companies, offering high quality exposure to the Qatar growth story

•Diversified for balanced exposure across the Qatari economy

•Strong market positions in key sectors

•Superior combination of high quality asset base, strong operating profitability and earnings visibility (delivering a compound annual growth rate in net profit before fair value gains on investment properties in excess of 15% from 2006-2012 and generating revenues of QAR 2,284m (US $627m) in 2012)

2) Balance sheet strength – strong backing of major shareholders•Strong asset backing

•Readily available access to debt capital markets, which, in addition to strong cash flow generation, provides strong liquidity for future growth

•Low gearing

3) Experienced, proven senior management team•Management strength in strategic asset allocation, corporate governance and risk

control

•Proven track record of historical profit growth and value creation driven by clear focus on returns on capital and capital discipline

•Highly effective corporate decision-making with short lines of communication with operational management

4) Strength in depth •Development of shared services policy, allowing divisional management to focus on

core business

•Each subsidiary managed as a individual entity, optimising management’s operational focus and transparency

•Talented and motivated managers with significant experience and customer relationships in their respective areas

•Clear segregation between management and ownership, reinforcing Best Practice Corporate Governance guidelines


Faisal Bin Qassim Al Thani Chairman


Chairman’s StatementOn behalf of the Board of Directors, I am pleased to present Aamal’s Annual Report for the year ended 31 December 2012.

Aamal has again delivered another strong annual performance in 2012 as we maintained our strong growth record, increasing revenues by almost 20% and reported earnings per share by more than 21%.

Aamal continued to expand its Industrial Manufacturing businesses in 2012, growing divisional revenues by over 32% year-on year in line with its established strategy to position itself to exploit the opportunities of Qatar’s impending infrastructure investment programmes. As a result Aamal is now predominantly an industrial company, deriving almost two thirds of total revenues from the Industrial Manufacturing division. This puts the Company in a strong position to seek, identify and capitalise on the growth opportunities that are being afforded by the rapid industrialisation of Qatar through a co-ordinated and committed economic development policy anchored in carefully planned exploitation of reserves and modernisation. The Qatar Government’s National Vision 2030 is the principal framework behind this policy, designed also to attract and stimulate foreign and domestic private capital.

Although Aamal is now principally an industrial manufacturing company, we continued to follow our policy of diversification across a number of non-manufacturing sectors. Our strength is in our diversity and this is what makes Aamal so distinctive. It is important that we remain market leaders in the areas we operate in as they offer significant potential growth as the Qatari economy continues to evolve. We are uniquely positioned to be able to offer comprehensive and well-balanced exposure to Qatar growth story, one of the fastest growing economies in the world. Of course, none of this would have been possible without the government support for the private sector and the wise leadership of His Highness the Emir, Sheikh Hamad Bin Khalifa Al Thani, and His Highness the Heir Apparent, Sheikh Tamim Bin Hamad Al Thani, may God protect them.

For Aamal to be such an integral part of this National Vision 2030 programme is what continues to excite and motivate us. Aamal is a growing company with an exciting future and I truly believe that we have built a solid foundation to support our rapid growth and I remain extremely positive about our prospects.

Faisal Bin Qassim Al ThaniChairman


Mohamed Bin Faisal Al Thani Vice Chairman


Vice Chairman’s ReportAamal is successfully positioned as predominantly an industrial Company. Aamal is well placed to capture the opportunities that are being afforded by the rapidly developing Qatari economy. The economy’s growth is being driven by a significant infrastructure and industrial development programme as part of the government’s Qatar National Vision 2030 that is seeking to diversify the country away from its substantial, long-term hydrocarbon reserves into alternative and sustainable avenues of growth. To illustrate the quantum of this programme, Qatar is expected to spend upwards of 150 billion US dollars on infrastructure alone in the next 5 years. Furthermore, Qatar has attractive demographics with its rapidly expanding population stimulating further economic growth.

The internal organic growth that Aamal has witnessed and expect to continue has been enhanced by selective acquisitions made during the year and new initiatives set up. During the year, we established a JV with C&C Lightway of South Korea called Innovative Lighting; took majority control of Gulf Rocks Company, an importer and distributor of high quality aggregates; secured sole Qatari distribution rights to supply Energizer Automotive Batteries; and launched a new consumer products line, called Gettco Home Appliances.

Aamal also have exposure to non-manufacturing sectors through our remaining three divisions of Trading & Distribution, Property and Managed Services, where we hold market leading positions. This scale and diversification makes us one of the few Qatari companies with the business model to benefit across the economic spectrum, making us such a unique investment proposition.

We are continually looking at new potential opportunities in order to consolidate and build upon our existing market leadership positions. First mover advantage is very important to Aamal and is part of our DNA; however, we would never compromise on the application of strict investment criteria when appraising potential new business opportunities in a bid to be first to market.

Because of the scale and diversification that we have, we enjoy a distinct advantage over many of our competitors as leading world class multinational companies continue to see us as the partner of choice when wanting to enter the Qatari market. Through long term strategic relationships, they are able to provide the requisite technical knowledge, brand and products that are required whilst Aamal is able to provide the necessary local market knowledge and skills on the ground.

Mohamed Bin Faisal Al ThaniVice Chairman


Tarek M. El Sayed Managing Director


Managing Director’s ReportAamal has successfully build a solid industrial base in order to take advantage of the opportunities afforded by the rapid development of Qatar; as the country moves from a hydrocarbon-based economy to more of a knowledge-based one, there is a great need for the development of its infrastructure, supported by the 2030 National Vision and boosted further by the award of the 2022 FIFA World Cup to Qatar.

Aamal will also continue to focus on its other business areas as this diversity is one of its key strengths. Aamal has grown into one of the region’s most successful conglomerates and will continue to grow and diversify, building on its already long-established market leading positions.

Aamal’s strategy is focused on 3 pillars for sustained, profitable growth: i) Increased focus on industrial manufacturing and related high growth sectors ii) Continued growth, diversification and innovation across other existing businesses to enhance market position and optimise performance iii) Continued application of clear and disciplined operational and financial principles underlying strategic growth initiatives

Furthermore, Aamal operates an effective risk framework where there is a clear focus on returns on capital and capital discipline and has a proven track record of financial and operating performance to support this.

Consequently, we are looking ahead to the future with great confidence as Aamal is well positioned to take up the opportunities that will present themselves as Qatar continues on its development path.

Qatar itself offers a unique combination of strong growth prospects and a stable low risk environment. For investors looking to gain a high quality and balanced exposure to Qatar, Aamal in our view is a very good proxy.

Tarek M. El SayedManaging Director


Corporate Governance “Aamal’s Board and Management are committed to meeting the expectations of stakeholders in practicing sound corporate governance. Aamal Company views corporate governance as an important factor in delivering success.”

Board committeesThe Board of Directors has formed five committees:1) Audit Committee 2) Nomination Committee3) Corporate Governance Committee 4) Compensation Committee5) Executive Committee

The dedicated committees meet regularly to assess operational effectiveness and ensure that the Company is performing in line with the set objectives.

Segregation of responsibilityIn accordance with the highest standards of good Corporate Governance, the Board has decided to segregate the executive management duties from the Board.

The executives operate from a well defined rule authorisation matrix and have various quantitative and qualitative targets set for them.

The executive management acts upon authorities approved by the Board of Directors. The Company policies and procedures are reviewed and updated regularly.

Relations with shareholdersAamal Company is committed to maintaining an active and open dialogue with its shareholders through a planned programme of investor relations activities centered around the financial reporting calendar. This programme includes formal presentations given at the half-year and full-year results as well as hosting the Annual General Meeting. Our website has a dedicated Investor Relations section to provide further information for all investors or potential investors while our Investor Relations team provides a channel for any other queries to be answered.

Support systemsThe Company uses the Oracle system as the primary Group IT System.


Board of Directors


Sheikh FaisalBin Qassim Al Thani Chairman

Sheikh MohamedBin Faisal Al Thani Vice Chairman


Yanni Jou’aneh Board Member

Bader A. Al Fehani Board Member

Sheikh AbdullahBin Hamad Al Thani Board Member


Executive Management


Mohamed RamahiChief Financial Officer

Mohamed DobashiChief Operating Officer

Maha Jadallah HarperChief Legal Advisor


General Managers

Samy HannaEbn Sina Medical

Ahmed El SewedyEl Sewedy Cables Qatar W.L.L.

Ra’ouf HassanDoha Cables W.L.L.

Asrar AhmedAamal Services Operations

Homok ChungInnovative lighting QLEDs

Parveez AslamAamal Readymix

Ayman MorarAamal Travel and Tourism

Amr GoharECCO Gulf

Jai ShankarAamal Trading & Distribution

Osama Al HajjAamal Real Estate

Sherif ShehataAamal Medical

Olaf WarzechaCity Center Doha

Keith SmithAamal Cement Industries W.L.L.


Organisational Chart

Board of Directors

Chairman

Managing DirectorNomination Committee

Chief Business Development officer

Business Development

Legal Department

Audit Committee

Executive Committee

Compensation Committee

Corporate Governance

Chief Financial OfficerChief Legal Adviser

Finance Department Head Office, Branches & Subsidiaries

Administration Department

Treasury DepartmentAamal Branches

General Managers

Subsidiaries Operations

Human Resources Department

Corporate Communication

Procurement Department

Chief Operating Officer


Functional Chart

Aamal Company Q.S.C

Industrial anufacturingProperty Trading and

DistributionManaged Services

Senyar Industries Qatar Holding*

Ci-San Trading*

Good LifeChemist

Johnson Controls Qatar*

Aamal ReadymixCity Center Doha

Aamal Trading & Distribution

Aamal Travel & Tourism

Aamal Cement Industries*

AamalReal Estate Aamal MedicalAamal Services

Advanced Pipes & Casts Company

Innovative Lighting Company*

Ebn SinaMedicalECCO Gulf*

Doha Transformers

Doha Cables*

Gulf Rocks*

Elsewedy Cables Qatar*

*Subsidiaries are not fully owned by Aamal.

Foot Care Center


One important objective of the Qatar National Vision 2030 is the development of sports and no better is this illustrated by the decision to award Qatar the right to host the 2022 FIFA World Cup. Aligned with this vision, Aamal has partnered with two key sports organisations in 2012 as part of its commitment to play a proactive and responsible role in promoting sports:•Qatar Football Association and•Qatar Racing and Equestrian Club Football is a very popular sport in our community and engages people of all ages. Horseback riding is considered a heritage sport, universally revered as one of the key elements of Qatari and Arab identity.

Key CSR activities by division:

Industrial Manufacturing DivisionDoha Cables W.L.L•Continuously seeks to employ production methods

that minimise damage to the physical and social environment through the use of raw materials that do not involved banned substances (currently there are six). To help ensure water purity levels, during the manufacturing and installation stages, non-hygroscopic water blocking tape is used instead of powder, which is toxic for humans. At the end of 2012, Doha Cables achieved Environmental Management System ISO 14001:2004 certification

•Developing products to address needs of sustainable power network design and green building technologies optimized for the GCC climate and the harsh environmental conditions

•Developing advanced fire resistant cable technology for fire fighting and safety applications (critical for skyscrapers, airports, hospitals, shopping malls, etc.)

•Affiliate member of Gulf Organization for Research and Development (GORD)

•Sponsoring conferences and summits, providing solutions for Qatar and the GCC in the fields of electrical engineering, power grids and infrastructure (Regional Strategic Partnership of the 4th General Conference of the Arab Union of Electricity and Exhibition organized by Qatar General Electricity and Water Cooperation (KAHRAMAA))

Aamal Readymix•Implemented a Fuel Emission Control programme

leading to discontinued use of diesel generators

•Approved member of the Qatar Green Building Council, as a recognition of its commitment to promote sustainable building practices

Aamal Cement Industries W.L.L. •Working to achieve 14001 ISO certification (already

achieved ISO 9001 certification status)•Ongoing programme to reduce the carbon foot print

through the recycling of in-house aggregate waste

Trading and Distribution DivisionEbn Sina Medical•Sponsored and participated in the ‘World Arthritis Day’

for Hamad Medical Hospital•Continuing to substitute environmentally harmful plastic

bags with d2w oxo-biodegradable bags throughout its pharmacy chain

•Continuing to support pharmacy students at the University of Qatar and the College of North Atlantic, through providing collaborative training work experience opportunities with the Ebn Sina pharmacy chain

•Supporting the scholarship programme for the Bachelor’s, Master’s and PhD Pharmacy students at Qatar University

Aamal Trading & Distribution•Launched ‘Bridgestone Tyre Safety and Eco Station

Campaign’ to promote road safety and environmental awareness

Property DivisionCity Center Doha•Continued to support various awareness campaigns

in collaboration with the Government and other non-profit organisations

•Successfully organised several profile raising campaigns such as the environmental benefits of recycling of plastic in conjunction with Qatar Petrochemical Company (QAPCO), the injustices of human trafficking in co-operation with the Qatar Foundation and ‘Kulluna’, a Health and Safety campaign in co-operation with Hamad Medical Corporation

Aamal will continue to build upon its core values of responsibility and sustainability implementing strategies that address environmental issues, empower people and provide training and safety awareness programmes to all its employees

Corporate Social Responsibility (CSR)


Operations Review

Industrial Manufacturing DivisionQAR m 2012 2011 Change %

Revenue 1,505.7 1,138.8 32.2%

Net Profit 56.7 62.1 (8.7)%

For the year ended 31 December 2012, the Industrial Manufacturing Division generated 64% of the Company’s revenues, and 19% of its net profit.

Aamal Industrial Manufacturing operations currently include the production and distribution of electric cables, equipment and tools, as well as the distribution of electro-mechanical equipment through Senyar Industries; production of high quality ready-mixed concrete through Aamal Readymix; and production of interlocking paving stones, concrete blocks and tiles through Aamal Cement Industries.

In 2012, Aamal acquired an effective 74.5% ownership of Gulf Rocks, a major importer and distributor of high quality aggregates and also established a JV with C&C Lightway of South Korea called “Innovative Lighting” to trade and distribute LED Lights and other lighting products for the Qatari market and the wider GCC region. In time, we expect to establish a factory that will assemble and manufacture LED lamps and other lighting products, which will be the first of its kind in Qatar.


سنيارIndustries Qatar Holding

Senyar Industries Qatar Holding W.L.L “Senyar”Is a 50:50 joint venture between Aamal and El Sewedy Electric Company, an Egyptian company listed on the Egyptian Exchange and producer of integrated cables and electrical products (such as transformers, tools and energy and water measurement and management). Senyar Industries consolidated subsidiaries and branches include:

Doha CablesThe first and largest cables manufacturing facility in Qatar, Doha Cables commenced operations in May 2010 specialising in the manufacturing of power cables, special cables, winding wires and cables accessories. Annual manufacturing production capacity is 40,000 tonnes of cable. Doha Cables is 85% interest owned by Senyar Industries Qatar Holding (El Sewedy Cables Qatar (of which Senyar owns 55%) owns a 12.5 % interest, with an unaffiliated third party the remaining 2.5%). Effective ownership by Aamal in Doha Cables is thus 45.9%.


El Sewedy Cables QatarEl Sewedy Cables Qatar commenced operations in 2006, specialising in the distribution of electro-mechanical equipment and cables for Doha Cables and third party manufacturers. A 49% stake (with 55% share of profits/losses) was acquired by Senyar Industries Qatar Holding from El Sewedy Electric Company in January 2010 with unaffiliated third parties owning the remaining 51%. Effective ownership by Aamal in El Sewedy Cables Qatar is 27.5%.

Doha TransformersDoha Transformers will produce primarily oil filled and dry transformers. It is expected to become operational by 2013.

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شركة سنيار للصناعات قطر القابضة ذ.م.م.: مشروع مشترك بالمناصفة بين شركة أعمال 50:50 والسويدي

إلكتريك، وهي شركة مصرية مدرجة في بورصة مصر تعمل في إنتاج منتجات متكاملة من الكابالت والمنتجات الكهربائية )مثل

المحوالت، وأدوات القياس وإدارة والطاقة والمياه(.

هنالك ثالثة مشاريع تابعة لسنيار للصناعات القابضة قطر تشمل ما يلي:

• الدوحة للكابالت ذ.م.م.: وهو أول مصنع للكابالت في قطر وقد بدأت عملية اإلنتاج في مايو 2010 والمصنع متخصص في

تصنيع جميع أنواع الكابالت الكهربائية ويعد أكبر مصنع إلنتاج الكابالت في قطر بقدرة إنتاجية سنوية تبلغ 40.000 طن

من الكابالت. إن سنيار للصناعات قطر القابضة تملك 85٪، في حين أن السويدي للكابالت قطر تمتلك 12.5٪ والطرف الثالث

غير ذي عالقة يملك ٪2.5.

• السويدي للكابالت قطر ذ.م.م.: السويدي للكابالت قطر متخصصة في توزيع المعدات الميكانيكية والكهربائية

والكابالت وتقوم بتوزيع منتجات الدوحة للكابالت. السويدي للكابالت قطر بدأت عملياتها في قطر عام 2006 وفي يناير

2010 قامت شركة سنيار للصناعات قطر القابضة على استحواذ نسبة 49٪ من شركة السويدى للكابالت قطر وتملك ما

نسبته 51٪ طرف ثالث غير ذي عالقة.

• الدوحة للمحوالت: ستقوم بإنتاج محوالت الجهد المنخفض الجافة والمحوالت المغمورة بالزيت حيث في عام 2011 تم استالم

تصريح البناء ومن المتوقع أن يكون المصنع جاهزًا خاللعام 2013.

في 2011، فازت سنيار بعّدة عقود مهمة في مجال كوابل الطاقة ها عقدان كبيران لتزويد المؤسسة العامة الكهربائية، من أهمِّ

القطرية للكهرباء والماء »كهرماء« بكابالت لمّدة سنتين.

سنيار للصناعاتقطر القابضة ذ.م.م.


Aamal ReadymixCommenced operations in 1994 and is one of the largest producers of quality ready-mixed concrete in Qatar with an annual production capacity of 600,000 m3.

Aamal Readymix was able to grow its sales by 37% during 2012, following the expansion of its production capacity with the launch of one of the Middle East’s largest concrete batching plants in 2012.


Aamal Cement Industries W.L.Lcommenced production of decorative interlocking paving stones and concrete blocks in 2010. It has an annual production capacity of approximately 25 million blocks or two million m2 of paving stones and has one of the largest block and pavement making machines in Qatar.

Aamal Cement Industries almost doubled its sales having introduced new products such as hydraulic pressed cable covers, and curb stones and decorative slabs in a variety of shapes and sizes.


Ci-San Trading W.L.LEstablished as a joint venture in 2008 with Masraf Al Rayyan, to evaluate investments in various sectors such as industrial, real estate, and trading opportunities in both local and international markets.

Gulf RocksEstablished in 2000 by Al Faisal Holding, is a leading importer and provider of high quality gabbro aggregates, which is widely used in concrete products, such as readymix concrete, construction concrete blocks and asphalt plants for road paving works. Effective ownership by Aamal is 74.5% (in 2012, Ci-San Trading purchased 51% with Aamal directly acquiring the remaining 49%).


Advanced Pipes & Casts Company W.L.LWas established in July 2010 as a joint venture between the Company and a Saudi Arabian subsidiary of the Lokma Group, a leading pipe manufacturer in the Middle East.

Advanced Pipes & Casts Company is due to start operations in the fourth quarter of this year, following a decision to increase the annual production capacity to 450,000 m3.

ADVANCED PIPES & CASTS CO.


innovative lighting w.l.l

Innovative Lighting (Qleds) W.L.LEstablished in 2012 as a joint venture with C&C Lightway of South Korea. The JV will initially trade in, and distribute, LED (Light Emitting Diode) and other lighting products (indoor, outdoor and façade) for the Qatari market and other GCC countries. The JV also plans to establish in the near future a factory to assemble and manufacture LED lamps and other lighting products using technology and know-how from C&C Lightway. The factory will serve the Qatari and MENA region markets and be the first of its kind in Qatar.


Operations Review Trading and Distribution DivisionQAR m 2012 2011 Change %

Revenue 533.6 523.6 1.9%

Net Profit 54.4 63.3 (14.0)%

For the year ended 31 December 2012, the Trading and Distribution Division generated 23% of the Company’s revenues, and 18% of its net profit.

The Trading and Distribution operations are primarily conducted through Ebn Sina Medical, Aamal Medical and Aamal Trading & Distribution.

During the year, the division witnessed the launch of a new home appliances line, ‘Gettco Home Appliances’ and also secured sole distributor status for Energizer Batteries.


Branch of Aamal Q.S.C.

Ebn Sina MedicalIs the leading pharmaceutical distribution company in Qatar and have a number of exclusive distribution agreements with international pharmaceutical companies including Roche, AstraZeneca, Novartis Pharma, Sanofi Aventis and Janssen Cilag. Ebn Sina Medical also operates two pharmacies and two health shops, made up of two retail shops called Foot Care Centre that provide a range of clinical foot care services foot care products and specialist footwear.

During 2012, Ebn Sina Medical launched several new products such as Priorin – for Bayer Consumer Care, New Blood Glucometer for Life Scan, Galvus Met for Novartis Pharma Company, MEBO Scar from Julphar UAE, Brilinta from AstraZeneca, and New Baby Milk formula from Liptis Hochdorf.


Aamal MedicalIs a leading medical equipment supplier in Qatar with a dedicated sales force and technical team responsible for equipment installation in hospitals and clinics and the provision of related training and maintenance. Aamal Medical has exclusive distribution agreements with a number of leading international medical equipment suppliers. In addition to sales of medical equipment, Aamal Medical also provides consultancy on, and builds, operating room theatres, and installs hospital information systems.

During the year, Aamal Medical successfully concluded its first deal with Hamad Medical Corporation for “Rowa”, the intelligent automated stock handling system for the storage and dispensing of medications for pharmacies and hospitals. Aamal Medical also delivered and handed over an operational turnkey project within Al Wakra Hospital for 7 integrated operating theatres, that are equipped with state of the art surgical equipment, allowing surgeons to have full control on “OR” equipment from a touch screen panel, or via voice recognition. Aamal Medical signed new agreements with major suppliers for innovative products including 1) Carestream, a major manufacturer in the field of medical imaging and radiology; 2) Amann Girrbach, pioneers in the field of CAD/CAM systems for Dental Labs; and 3) Masimo, a key global manufacturer for innovative non-invasive patient monitoring technologies.


Aamal Trading & DistributionThe exclusive distributor in Qatar of Bridgestone tyres since 1971 and a non-exclusive distributor of TOTAL oil and lubricant products since 1990. Aamal Trading & Distribution is also involved with the supply, installation, commissioning and maintenance of air conditioning and refrigeration equipment.

Aamal Trading & Distribution saw the launch of a new consumer products line labelled “Gettco Home Appliances” which offer a full range of Gettco branded home appliances such as LED TVs, air conditioners, refrigerators, gas cookers, microwaves and so forth. These appliances are being manufactured in China by a world-renowned producer that is one of the largest in the world, already supplying to other international brands.

In addition, Aamal Trading and Distribution secured the sole Qatari distribution rights to supply Energizer Automotive Batteries, under license from Johnson Controls Battery Group.


Operations Review Property DivisionQAR m 2012 2011 Change %

Revenue 234.3 213.7 9.6%

Net Profit * 181.8 161.1 12.9%

*Net profit before fair value gains on investment properties

For the year ended 31 December 2012, the Property Division generated 10% of the Company’s revenues and 61 % of its net profit, excluding fair value gains on investment properties.

Through this division, Aamal owns and leases retail and residential properties. These include City Center Doha and Aamal Real Estate.

Fair value gains on investment properties for the year amounted to almost QAR 390 million, compared to just under QAR 288 million a year ago. This is largely down to the on-going improvements to the City Center shopping mall and revaluations of land plots purchased during the year.


City Center DohaCity Center Doha opened in 2000, was one of the first shopping malls in Doha and remains the largest, based upon its net leasable area. City Center has 372 shops, 62 kiosks, a 14-screen cinema, exhibition hall, family entertainment facility and an indoor ice skating rink.

City Center’s increase in rental levels reflects the recent expansion and renovation of the retail space and chargeable parking.

In 2012, phase 1 of the City Center Doha expansion project was now largely completed, adding around 7,000 square metres of new retail space, equivalent to around 60 new retail units. Parking capacity has also increased by around 25%.

Occupancy at both City Center Doha and Aamal Real Estate remained at a high level at 95%, with 5% held back as a strategic reserve in order to allow for active management.


Aamal Real EstateAamal Real Estate owns Souq Najma (Al Haraj), built in 1993 as a traditional Middle Eastern souq comprised of 347 shops, 25 kiosks and 24 residential flats. In addition, Aamal Real Estate owns four residential complexes in Doha.

The rise at Aamal Real Estate in part is due to a full twelve months’ contribution from the Markhiya residential complex that was fully leased out from the beginning of April 2011.


Operations Review Managed Services DivisionQAR m 2012 2011 Change %

Revenue 84.6 57.5 47.3%

Net Profit 7.4 7.7 (3.9)%

For the year ended 31 December 2012, the Managed Services Division generated 3% of the Group’s revenues and 2% of its net profit.

The Managed Services operations focus primarily on providing commercial facilities management, outsourcing and other business support services.


Johnson Controls QatarJohnson Controls provides facility improvement and energy solutions to customers in Qatar. Johnson Controls Qatar offers green building and building efficiency solutions using eco-friendly materials and techniques that help lower carbon emissions and lower electricity consumption by approximately 30%. This is in line with Aamal’s strategy to offer environmentally-friendly products and services.


ECCO Gulf W.L.L

ECCO Gulf W.L.L is a joint venture between the Company and Egyptian Contact Centre Operator, a leading Egyptian business process outsourcing provider that commenced operations in 2010. ECCO Gulf offers Business Process Outsourcing, professional service outsourcing and human resources outsourcing to clients in Qatar.

During the year, ECCO Gulf’s new Delivery Center went live and this has helped to increase penetration in the Qatari banking sector, attracting several major clients in different sectors such as media, banking, real estate and fast food.


Aamal ServicesAamal Services provides a wide range of services, including cleaning, hotel and hospitality services, waste collection and disposal (including medical waste and solid waste), ground maintenance and landscaping, pest control and fleet/car washing.


Aamal Travel Aamal Travel an International Air Transport Association (IATA) accredited travel agency providing a range of travel services, including airline reservations and ticketing, worldwide hotel bookings and holiday packages.

Aamal Travel continued to offer its comprehensive range of travel services to its clients and also won a number of new major contracts in 2012.


Aamal Company Q.S.C.CONSOLIDATED FINANCIAL STATEMENTS31 DECEMBER 2012


Independent auditors’ report

To The ShareholdersAamal Company Q.S.C.Doha State of Qatar

Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of Aamal Company Q.S.C. (the “Company”) and its subsidiaries (together referred to as the “Group”), which comprise the consolidated statement of financial position as at 31 December 2012 and the consolidated statements of income, comprehensive income, cash flows and changes in equity for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Directors’ responsibility for the consolidated financial statements

The directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Group’s preparation and fair presentation of the consolidated financial statements 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 Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2012 and of its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.


Other matter

The consolidated financial statements of the Group as at and for the year ended 31 December 2011 were audited by another auditor who expressed an unmodified opinion on those consolidated financial statements on 31 March 2012

Report on other legal and regulatory requirements

We have obtained all the information and explanations which we consider necessary for the purpose of our audit. The Group has maintained proper accounting records and the consolidated financial statements are in agreement therewith and we confirm that the physical count of inventories was carried out as per the established principles. We have reviewed the accompanying report of the Board of Directors and confirm that the financial information contained therein is in agreement with the books and records of the Group. We are not aware of any violations of the provisions of Qatar Commercial Companies’ Law No. 5 of 2002 or the terms of Article of Association having occurred during the year which might have had a material adverse effect on the business of the Company or its consolidated financial position as at 31 December 2012.

4 March 2013 Gopal Balasubramaniam

Doha KPMG

State of Qatar Qatar Auditors Registry Number 251

Independent auditors’ report (continued) – Aamal Company Q.S.C.


CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt 31 December 2012

2012 2011Note QR QR

ASSETS Current assetsCash and bank balances 5 381,029,801 175,503,595Accounts receivable and prepayments 6 655,812,086 689,624,369Amounts due from related parties 7 228,283,877 211,572,003Inventories 8 437,345,979 439,562,235

1,702,471,743 1,516,262,202

Non-current assetsGoodwill 9 109,132,500 109,132,500Available-for-sale investments 18,963 -Investment in associates 10 2,545,190 7,011,140Investment properties 11 6,113,347,018 5,551,835,348Property, plant and equipment 12 451,568,213 428,336,183

6,676,611,884 6,096,315,171

TOTAL ASSETS 8,379,083,627 7,612,577,373

LIABILITIES AND EQUITYCurrent liabilitiesAccounts payable and accruals 13 634,178,161 702,079,602Amounts due to related parties 14 59,751,359 81,947,467Interest bearing loans and borrowings 15 825,568,489 399,077,202Bank overdrafts 5 2,885,090 7,857,113

1,522,383,099 1,190,961,384

Non-current liabilitiesInterest bearing loans and borrowings 15 239,276,807 429,325,448Employees’ end of service benefits 16 18,968,164 18,664,561

258,244,971 447,990,009

TOTAL LIABILITIES 1,780,628,070 1,638,951,393

EQUITYShare capital 17 5,445,000,000 4,950,000,000Legal reserve 18 327,445,101 267,955,805Treasury shares (2,075,865) -Cumulative change in fair value (416) -Retained earnings 638,248,275 614,024,670

Equity attributable to equity holders of the parent 6,408,617,095 5,831,980,475Non-controlling interests 189,838,462 141,645,505

ToTAL EQuITy 6,598,455,557 5,973,625,980

TOTAL LIABILITIES AND EQUITY 8,379,083,627 7,612,577,373

Sheikh Faisal Bin Qassim Al-ThaniChairman

Tarek Mahmoud El SayedManaging Director

Mohammad RamahiChief Financial Officer

The attached notes 1 to 33 form an integral part of these consolidated financial statements.


CONSOLIDATED STATEMENT OF INCOMEFor the year ended 31 December 2012

2012 2011Note QR QR

Revenue 19 2,283,884,350 1,910,137,286Direct costs 20 (1,837,546,297) (1,469,345,073)

GROSS PROFIT 446,338,053 440,792,213

Other income 21 17,088,840 7,355,968Marketing and promotion expenses (22,937,344) (20,188,031)General and administrative expenses 22 (133,422,377) (114,112,858)Depreciation (9,911,531) (8,971,071)Finance costs 23 (61,968,685) (59,715,171)Share of profit of associates 10 534,050 875,458

PRoFIT BEFoRE FAIR VALuE GAINS oN INVESTMENT PRoPERTIES 235,721,006 246,036,508

Net fair value gains on investment properties 11 388,792,483 287,639,069

PRoFIT FoR THE yEAR 624,513,489 533,675,577

Profit attributable to:Equity holders of the parent 594,892,946 492,153,575Non-controlling interests 29,620,543 41,522,002

624,513,489 533,675,577

Basic and diluted earnings per share (QR)(attributable to equity holders of the parent) 24 1.09 0.90


60

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 31 December 2012

A A M A L A N N U A L R E P O R T 1 2

2012 2011QR QR

Profit for the year 624,513,489 533,675,577

other comprehensive incomeUnrealised gain on available-for-sale investments 109,582 -

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 624,623,071 533,675,577

Total comprehensive income attributable to:Equity holders of the parent 594,892,530 492,153,575Non-controlling interests 29,730,541 41,522,002

624,623,071 533,675,577


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2012


2012 2011Note QR QR

OPERATING ACTIVITIESProfit for the year 624,513,489 533,675,577Adjustment for:

Net fair value gains on investment properties 11 (388,792,483) (287,639,069)Depreciation 12 43,242,966 39,463,336Provision for employees’ end of service benefits 16 4,652,765 4,675,886Bargain purchase gain 21 (8,360,793) -Profit on disposal of property, plant and equipment 21 178,620 (76,290)Interest income 21 (2,968,837) (1,987,181)Finance costs 23 61,968,685 59,715,171Share of profit of associates 10 (534,050) (875,458)

Operating profit before working capital changes: 333,900,362 346,951,972Inventories (38,773,977) (233,007,931)Accounts receivable and prepayments (112,936,799) (302,247,121)Accounts payable and accruals 127,764,666 447,521,096Net movement in amounts due from and due to related parties 12,697,923 (112,481,628)

Cash from operations 322,652,175 146,736,388Finance costs paid (62,548,530) (59,583,410)End of service benefits paid 16 (4,344,453) (1,129,577)

Net cash from operating activities 255,759,192 86,023,401

INVESTING ACTIVITIESInterest income received 21 2,968,837 1,987,181Proceeds from disposal of property, plant and equipment 684,660 767,308Movement in bank deposits blocked as collateral - 460,820Dividends received from an associate - 323,286Additions to investment properties 11 (172,719,187) (7,489,831)Acquisition of a subsidiary, net of cash acquired 4 (16,594,505) -Acquisition from non-controlling interest 4 (40,410,000) -Additions to property, plant and equipment (69,092,093) (56,877,736)

Net cash used in investing activities (295,162,288) (60,828,972)

FINANCING ACTIVITIESNet movement in interest bearing loans and borrowings 237,007,133 39,811,676Contributions from non-controlling interests 21,800,000 15,980,000Dividends paid to non-controlling interests - (25,897,059)

Net cash from financing activities 258,807,133 29,894,617

INCREASE IN CASH AND CASH EQUIVALENTS 219,404,037 55,089,046Decrease in cash due to loss of control of a subsidiary (13,905,808) -Increase in cash resulted in obtaining the control of an associate 5,000,000 -Cash and cash equivalents at 1 January 167,646,482 112,557,436

CASH AND CASH EQUIVALENTS AT 31 DECEMBER 5 378,144,711 167,646,482


CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 31 December 2012

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012


1 CORPORATE INFORMATION AND PRINCIPAL ACTIVITIES

Aamal was formed on 13 January 2001 as a private shareholding company with limited liability (W.L.L.) under the Commercial Registration Number 23245 in the State of Qatar. On 12 July 2007, the private shareholders resolved to transform Aamal into a Qatari Shareholding Company (Q.S.C.) (the “Company”). Accordingly, the Company was listed on Qatar Exchange on 5 December 2007. The Company’s registered office is at P.O. Box 22477, Doha, State of Qatar.

The Company is organised into a head office (Aamal) and branches and operates in the State of Qatar. The following table sets out the principal activities of the branches:

Branch Principal activities

City Center Qatar Branch Leasing the facilities of the retail outlet complex in City Center Doha.

Aamal Real Estate Branch Residential and commercial real estate investment and property rental.

Aamal Readymix Branch Production and sale of readymix concrete.

Ebn Sina Medical Branch Wholesale and retail distribution of pharmaceuticals and general consumable products.

Aamal Medical Branch Wholesale distribution of medical equipment.

Aamal Trading and Distribution Branch

Sale of tyres, lubricants, batteries and home appliances.

Aamal Services Branch Providing facilities management and cleaning services.

Aamal Travels Branch Operating a travel agency.

Aamal for Industrial Projects Branch

Industrial investments.

Bottega Verde Qatar Sale of beauty care products.

Good Life Pharmacy Branch

Sale of pharmaceuticals, baby care products, medicine and general consumable products.

City Center Pharmacy Branch

Sale of pharmaceuticals and general consumable products.

Foot Care Center Branch Sale of footwear, clinical activities and general commercial trading products.

The consolidated financial statements were authorised for issue by the representatives of the Board of Directors of Aamal Company Q.S.C. on 4 March 2013.

2 BASIS OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of Aamal Company Q.S.C. (the “Company”) and its subsidiaries and joint controlled entity (together referred to as the “Group”).

Subsidiaries

Subsidiaries are those enterprises that are controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Upon loss of control, the Group accounts for the investment retained at its fair value at the date when control was lost. The financial statements of subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies.


64




2 BASIS OF CONSOLIDATION (continued)

Subsidiaries (continued)

The principal subsidiaries and jointly controlled entity of the Group incorporated in the consolidated financial statements are as follows:

Company nameCountry of

incorporation Principal activityEffective holding

percentage

2012 2011

Aamal Cement Industries W.L.L.

Qatar Development and management of factories and the production of curb stone, interlock slabs and cement bricks.

99% 99%

IMO Qatar Company W.L.L.

Qatar Construction and repair of power plant, establishment and management of industrial enterprises and acting as a representative for the international companies.

60% 60%

Senyar Industries Qatar Holding W.L.L.

Qatar Management of subsidiaries and associates, owning of patents, businesses and subletting them and provision of investment portfolio management for its subsidiaries and associates. Under the shareholders agreement signed between the Group and the other shareholders, the Group is able to appoint the chairman and two other members to the Board of Directors (out of six members) and is able to govern the financial and operating policies of Senyar Industries Qatar Holding W.L.L. Accordingly, the company is considered as a subsidiary of the Group.

50% 50%

Doha Cables Qatar W.L.L.

Qatar Maintenance and manufacture of electric cables, equipment and tools. Doha Cables Qatar W.L.L. is 91.875% (effectively) owned by Senyar Industries Qatar Holding W.L.L., a subsidiary of the Group. The Group has the power, indirectly through Senyar Industries Qatar Holding W.L.L., to govern financial and operating policies of Doha Cables Qatar W.L.L. and accordingly the company was considered as a subsidiary of the Group.

45.9% 45.9%

El Sewedy Cables Qatar W.L.L.

Qatar Trading in electro-mechanical equipment and providing related services. El Sewedy Cables Qatar W.L.L. is 49% owned (with 55% share of profits / (losses) by Senyar Industries Qatar Holding W.L.L., a subsidiary of the Group. This entity was treated as a subsidiary of the Group for the year ended 31 December 2011. However due to a revised shareholders agreement, the entity has become a jointly controlled entity effective from 1 January 2012 and the management of the Group has adopted the proportionate consolidation method to account for the entity. As a result of the above change, the non-controlling interest and related net assets amounting to QR 983,643 were deconsolidated as at 1 January 2012.

27.5% 27.5%



2 BASIS OF CONSOLIDATION (continued)

Subsidiaries (continued)

Company nameCountry of

incorporation Principal activityEffective holding

percentage

2012 2011

Ecco Gulf Company W.L.L.

Qatar Offers professional and business process outsourcing and call center services.

51% 51%

Advanced Pipes and Casts Company W.L.L.

Qatar Manufacturing of wide cement and glass reinforced pipes systems for infrastructure and pipeline projects. The Group has the power to govern the financial and operating policies of Advanced Pipes and Casts Company W.L.L. by virtue of a shareholders’ agreement. Thus the Company has been considered as a subsidiary of the Group.

50% 50%

Johnson Controls Qatar W.L.L.

Qatar Provision of facilities management services, energy services and building maintenance and cleaning services to corporate clients.

51% 51%

Ci-San Trading W.L.L.

Qatar Selling, buying, renting and developing real estate, investment in shares, management of real estate properties, owning the patent and trademark and trading in equipment and vehicles. The Group has the power to govern the financial and operating policies of Ci-San by virtue of a shareholders’ agreement. (refer Note 10 for the details of the change in controlling power during the year).

50% 50%

Gulf Rocks Qatar Retail distribution of aggregates. 74.5% -

Innovative Lighting W.L.L.

Qatar Trading of Light Emitting Diode (LED) Lamps and other lighting products.

70% -

Transactions eliminated on consolidation

Inter-company balances and transactions, and any unrealized gains arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealized losses are eliminated to the extent that there is no evidence of impairment.

Non-controlling interests

Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the consolidated statement of income, comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to shareholders of the parent. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.

66




3.3 IASB STANDARDS AND INTERPRETATIONS ISSUED BUT NOT ADOPTED

The following IASB standards/amendments have been issued but are not yet mandatory, and have not been early adopted by the Group:

Standard/Interpretation Content Effective date

IAS 1 Presentation of Financial Statements (amendment) 1 July 2012

IAS 19 Employee Benefits (amendment) 1 January 2013

IAS 28 Investments in Associates and Joint Ventures (amendment) 1 January 2013

IFRS 7 Financial Instruments: Disclosures (amendment) 1 January 2013

IAS 32 Financial Instruments: Presentation (amendment) 1 January 2013

IFRS 9 Financial Instruments (new standard) 1 January 2015

IFRS 10 Consolidated Financial Statements (new standard) 1 January 2013

IAS 27 Consolidated and Separate Financial Statements (amendment) 1 January 2013

IFRS 11 Joint Arrangements (new standard) 1 January 2013

IFRS 12 Disclosure of Interests in Other Entities (new standard) 1 January 2013

IFRS 13 Fair Value Measurement (new standard) 1 January 2013

The Group is considering the implications of the above standards, and the timing of adoption by the Group.

3.1 BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and applicable requirements of Qatar Commercial Companies’ Law No. 5 of 2002.

The consolidated financial statements have been presented in Qatari Riyals (QR), which is the Group’s functional and presentation currency and have been rounded to the nearest Qatari Riyal. The consolidated financial statements are prepared under the historical cost convention modified to include the measurement at fair value of investment properties and available-for-sale investments.

3.2 CHANGES IN ACCOUNTING POLICIES

The accounting policies adopted are consistent with those of the previous financial year except for the following standards effective for the annual period beginning on or after 1 January 2012:

IFRS 7 (amendment) – Disclosures: Transfer of financial assets

The amendments to IFRS 7 introduce new disclosure requirements about transfers of financial assets

including disclosures for financial assets that are not derecognised in their entirety; and financial assets that are derecognised in their entirety but for which the entity retains continuing involvement. The adoption of this amendment had no significant impact on the consolidated financial statements.

Improvements to IFRS (2011)

Improvements to IFRS issued in 2011 contained numerous amendments to IFRS that the IASB considers non-urgent but necessary. ‘Improvements to IFRS’ comprise amendments that result in accounting changes to presentation, recognition or measurement purposes, as well as terminology or editorial amendments related to a variety of individual IFRS standards. There were no significant changes to the current accounting policies of the Group as a result of these amendments.

The following amendments, interpretations became effective in 2012, but did not have any impact on the accounting policies, financial position or performance of the Group:

Standard/Interpretation Content

IAS 12 Deferred Tax Recovery of Underlying Assets

3 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Business combinations and goodwill

Business combinations are accounted for using the acquisition method. 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 acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed 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 acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration, which is deemed to be an asset or liability, will be recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity. Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within

that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Goodwill is tested for impairment annually (as at 31 December) and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and bank balances and short term bank deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

Accounts receivable

Accounts receivable are stated at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when there is no possibility of recovery.

3 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

68




Inventories

Inventories are stated at the lower of cost and net realisable value. Costs are those expenses incurred in bringing each product to its present location and condition.

- Goods for resale/work in progress Cost of direct materials and labour plus attributable overheads based on a normal level of activity.- Raw material and spare parts Purchase cost on a weighted average basis.

Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal.

Investment in associates

The Group’s investment in its associates is accounted for using the equity method of accounting. An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture.

Under the equity method, the investment in the associate is carried in the consolidated statement of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. The consolidated statement of income reflects the Group’s share of the results of operations of the associate. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the consolidated statement of changes in equity.

The reporting dates of the associates and the Group are identical and the associates’ accounting policies conform to those used by the Group for like transactions and events in similar circumstances.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss of the Group’s investment in its associates. The Group determines at each reporting date whether there is any objective evidence that the investment in associates is impaired. If this is the case, the Group calculates the amount of impairment as being the difference between the recoverable amount of the associate and the carrying value and recognises the amount in the consolidated statement of income.

Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group’s interest in such associate.

Investment properties

Land and buildings are considered as investment properties only when they are being held to earn rentals or for capital appreciation or for both.

Investment properties are measured initially at cost, including transaction costs and borrowing costs that are directly attributable to construction of the asset. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the consolidated statement of income in the year in which they arise.

Investment properties are derecognised when either they have been disposed off or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the consolidated statement of income in the year of retirement or disposal.


3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


Investment properties (continued)

Property under construction is dealt with under IAS 40 and recorded at cost less accumulated impairment losses until either its fair value becomes reliably determinable or construction is completed (whichever is earlier). At that time, it is reclassified as investment property and a fair value adjustment is recognised in the consolidated statement of income.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, the difference between the carrying value and the fair value at the date of transfer is recognised as a revaluation reserve in the equity and is released to the consolidated statement of income upon disposal of such property.

Property, plant and equipment

Property, plant and equipment is stated at cost including borrowing costs that are eligible for capitalisation and excluding the costs of day-to-day servicing, less accumulated depreciation and any impairment in value.

Depreciation is provided on a straight-line basis on all property, plant and equipment. The rates of depreciation are based upon the following estimated useful lives:

Buildings 20 yearsLeasehold improvements 2-8 yearsTruck mixers and motor vehicles 4-15 yearPlant and machinery 8-25 yearsFurniture, fixtures and office equipment 3-5 yearsComputers and related software 3-5 yearsC ap ita l w o rk in p rog ress Not depreciated

The carrying amounts are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use.

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of property, plant and equipment. All other expenditure is recognised in the consolidated statement of income as the expense is incurred.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the consolidated statement of income in the year the asset is derecognised.

The asset’s residual values, useful lives and method of depreciation are reviewed, and adjusted if appropriate, at each financial year end.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the year they incur. Borrowing costs consist of the interest and other costs that the Group incurs in connection with the borrowing of funds.

Accounts payable and accruals

Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.



70




Interest bearing loans and borrowings

Interest bearing loans and borrowings are recognised initially at fair value of the amounts borrowed, less directly attributable transaction costs. Subsequent to initial recognition, interest bearing loans and borrowings are measured at amortised cost using the effective interest method, with any differences between the cost and final settlement values being recognized in the consolidated statement of income over the period of borrowings. Installments due within one year at amortised cost are shown as a current liability.

Gains or losses are recognised in the consolidated statement of income when the liabilities are derecognised. Interest relating to interest bearing loans and borrowings is expensed in the year in which it is incurred except those qualify for capitalisation.

Tenant deposits

Tenant deposit liabilities are initially recognised at fair value and subsequently measured at amortised cost where material. Any difference between the initial fair value and the nominal amount is included as a component of rental income and recognised on a straight-line basis over the lease term.

Derecognition of financial assets and liabilities

a) Financial assetsA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where:

• The rights to receive cash flows from the asset have expired;

• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset.

In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

b) Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the consolidated statement of income.




Impairment and uncollectibility of financial assets

An assessment is made at each reporting date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the consolidated statement of income. Impairment is determined as follows:

(a) For assets carried at fair value, impairment is the difference between cost and fair value;

(b) For assets carried at cost, impairment is the difference between cost and the present value of future cash flows discounted at the current market rate of return for a similar financial asset.

(c) For assets carried at amortised cost, impairment is the difference between carrying amount and the present value of future cash flows discounted at the original effective interest rate.

Provisions

Provisions are recognised when the Group has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and able to be reliably measured.

Employees’ end of service benefits

The Group provides end of service benefits to all employees in accordance with employment contracts and Qatar Labour Law. The entitlement to these benefits is based upon the employees’ final salary and length of service, subject to the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment.

Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received excluding discounts, rebates and duty. The following specific recognition criteria must also be met before revenue is recognised:

Sale of goods

Sales are recognised when significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably.

Rental income

Rental income from investment properties is accounted for on a time proportion basis over the period of tenancy. Incentives for leases to enter into lease agreements are spread evenly over the lease term, even if the payments are not made on such basis. Income arising from expenses recharged to tenants is recognised in the year in which the expenses can be contractually received. Service charges and other such receipts are included gross of related costs in revenues as the Group acts as principal in this regard. Premiums received to terminate leases are recognised in the consolidated statement of income when they arise.

Service income

Service income is recognised when the service is rendered and the outcome of the transactions can be estimated reliably.

Commission

Commission is accounted for on an accrual basis, when the right to receive the income is established.

Income on travel agencies

Income on travel agencies is accounted for in the year in which the airline tickets are sold.

Interest income

Interest income is recognised as the interest accrues using the effective interest rate method.



72




Foreign currencies

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. All differences are recognised in the statement of income.

Use of estimates

The preparation of the Group’s consolidated financial statements in conformity with International Financial Reporting Standards (IFRS) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates. (Significant assumptions, accounting judgments and estimates used in preparing these consolidated financial statements are disclosed in Note 32).

The estimates and underlying assumptions are reviewed regularly. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Fair values

The fair value of investment properties is based on valuations carried out by an external independent evaluator.

The fair value of interest bearing items is estimated based on discounted cash flows using interest rates for items with similar terms and risk characteristics.

Treasury shares

When share capital recognized in equity is repurchased (by the Company or any of its subsidiaries), the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is presented in share premium.




4 BUSINESS COMBINATION

Acquisition of Gulf Rocks Company W.L.L.On 1 January 2012, the Group acquired 51% of the voting shares of Gulf Rocks Company W.L.L. (Gulf Rocks), a limited liability company incorporated in Qatar and registered under commercial registration number 22490. The acquisition was made through Ci-San Trading W.L.L., a subsidiary which is 50% owned by Aamal Group.

The fair value of the identifiable assets and liabilities of Gulf Rocks Company W.L.L. based on purchase price allocation exercise conducted by the management, as at the date of acquisition was as follows:

Fair value recognized on

acquisition QR

AssetsCash and bank balances 14,005,495Accounts receivable and prepayments 11,749,383Amounts due from related parties 48,311,190Inventories 5,124,270Available for sale investments 1,985,245Plant and equipment 676,917

81,852,500

LiabilitiesAccounts payable and accruals 4,724,446Amounts due to related parties 385,070Employees’ end of service benefits 349,272

5,458,788

Total identifiable net assets (76,393,712)Purchase consideration transferred 30,600,000Non-controlling interest arising on business combination 37,432,919Bargain purchase gain resulting from the acquisition (8,360,793)

Analysis of cash flows on acquisition:Net cash acquired with the subsidiary 14,005,495Cash paid (30,600,000)

(16,594,505)

On 1 September 2012 the Company acquired the balance 49% of the equity of Gulf Rocks. Accordingly the Group has 74.5% effective holding in Gulf Rocks as at the reporting date. The excess of the purchase consideration over the fair value of net assets of Gulf Rocks acquired from the non-controlling interest has been recorded directly in the retained earnings of the Group as at 31 December 2012.

QRPurchase consideration 40,410,000Less: fair value of net assets acquired from the non-controlling interest holder (39,842,792)Excess of purchase consideration over the fair value of net assets acquired 567,208

74




5 CASH AND CASH EQUIVALENTS

For the purpose of consolidated statement of cash flows, cash and cash equivalents comprise the following balances:

2012 2011QR QR

Cash and bank accounts 295,421,405 138,658,335Short term bank deposits 85,608,396 36,845,260Cash and bank balances 381,029,801 175,503,595

Bank overdrafts (2,885,090) (7,857,113)

Cash and cash equivalents 378,144,711 167,646,482

The short term bank deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short term deposit rates.

6 ACCOUNTS RECEIVABLE AND PREPAYMENTS

2012 2011QR QR

Trade accounts receivable 485,770,482 617,203,357Advances to suppliers and prepayments 66,114,343 44,062,714Retention receivables 85,109,075 16,624,225Other receivables 18,818,186 11,734,073

655,812,086 689,624,369

As at 31 December 2012, trade accounts receivable amounting to QR 24,984,025 (2011: QR 11,877,085) were impaired. Movements in the allowance for impairment of trade accounts receivable were as follows:

2012 2011QR QR

At 1 January 11,877,085 9,417,343Charge for the year (Note 22) 13,613,120 4,876,765Adjusted against general reserve - 3,822,500Amounts written off (117,368) (5,634,944)Unused amounts reversed (388,812) (604,579)

At 31 December 24,984,025 11,877,085


6 ACCOUNTS RECEIVABLE AND PREPAYMENTS (continued)

As at 31 December, the ageing of unimpaired trade accounts receivable was as follows: Past due but not impaired

Total

Neitherpast due nor

impaired

< 30 days

31-60days

61-90days

91-120days

> 120days

QR QR QR QR QR QR QR

2012 485,770,482 205,412,554 82,260,811 77,169,306 31,417,457 23,135,986 66,374,3682011 617,203,357 298,874,961 73,487,822 100,995,001 41,663,754 38,402,300 63,779,519

Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice of the Group to obtain collateral over receivables.

7 AMOUNTS DUE FROM RELATED PARTIES

2012 2011Name QR QR

Al Faisal Holding Company W.L.L. 119,541,970 102,537,899El Sewedy Cables Qatar W.L.L 73,621,122 -United Metals Company 16,760,405 88,295,207Al Jazi Real Estate Investment Company W.L.L.- Al Jazi Real Estate Branch 5,159,097 -El Sewedy Holding Company - 7,765,544El Sewedy Electric Egypt W.L.L. 2,881,659 1,582,284Maintenance Management Group Qatar W.L.L. 2,368,246 1,550,527Good Life Chemist - The Pearl 1,867,526 1,801,020Bader Pharmacy 1,800,922 1,259,409Al Faisal International Trade and Investment Company W.L.L. 1,043,571 1,314,554Al-Arabia Land Transporting Company W.L.L. 746,395 393,550El Sewedy Cables – Kuwait - 1,103,215Al Jawhara Pharmacy - 951,097Gettco International 459,829 706,260Frijns Structural Steel Middle East W.L.L. 244,940 116,211Winter Wonderland 186,750 22,500Al Farman for Investment & International Trading Company W.L.L. 143,440 124,130Qatar Bahrain International Cinema W.L.L. 77,680 86,268Gulf English School 74,599 81,856Dyarco International Trading Company W.L.L. - 49,480Stenden University - 25,990Family Entertainment Center Company W.L.L. - 10,000Good Life Chemist - Al Saad - 336,434Other related parties 1,305,726 1,458,568

228,283,877 211,572,003

Notes:

(i) Transactions with related parties are carried out through open account and Directors do not consider any receivables to be past due or impaired.

(ii) Related party transactions are disclosed in Note 27.

76




8 INVENTORIES

2012 2011QR QR

Goods for resale 253,311,273 282,584,068Raw materials and spare parts 36,608,394 37,119,699Work in progress 30,622,960 46,899,680Goods in transit 119,949,178 75,754,780

440,491,805 442,358,227Less: Provision for obsolete and slow moving inventories (3,145,826) (2,795,992)

437,345,979 439,562,235

Movements in the provision for obsolete and slow moving inventories were as follows:

2012 2011QR QR

At 1 January 2,795,992 2,365,333Charge for the year (Note 20) 2,208,263 939,857Reversals (137,995) (484,201)Amounts written off (1,720,434) (24,997)

At 31 December 3,145,826 2,795,992

9 GOODWILL

The details of goodwill recognised in the consolidated financial statements are as follows:

2012 2011QR QR

El Sewedy Cables Qatar W.L.L. 109,132,500 109,132,500

For the purpose of impairment testing, goodwill is allocated to the cash generating units (“CGU”), being the Group’s subsidiary, which represents the lowest level within the Group at which the goodwill is monitored for internal management purposes. The impairment testing of the CGU carried out at the year end did not result in any impairment.


10 INVESTMENT IN ASSOCIATES

The Group has the following investments in associate companies.

Country of incorporation ownership interest

2012 2011

Ci – San Trading W.L.L. Qatar - 50%

Frijns Structural Steel Middle East W.L.L. Qatar 20% 20%

Al Farazdaq W.L.L. Qatar 35% 35%

Ci – San Trading W.L.L.

With effect from 1 January 2012, the management of the Group has reclassified the investment in Ci-San Trading W.L.L. from investment in associate to investment in subsidiary. This is based on an agreement executed with the other shareholder, whereby the control of financial and operating policies of Ci-San Trading W.L.L. has been assigned to the Company.

Frijns Structural Steel Middle East W.L.L.

The Group holds 20% of the ownership interest of Frijns Structural Steel Middle East W.L.L., which was registered and incorporated on 6 November 2008. It is engaged in steel fabrications.

Al Farazdaq W.L.L.

The Group holds 35% of the ownership interest of Al Farazdaq W.L.L., which was registered and incorporated on 12 August 2009. It is engaged in providing printing and advertising services to industrial customers.

The following table illustrates summarized financial information of the Group’s investment in associates:

2012 2011QR QR

Share of associates’ statement of financial position:Current assets 7,318,919 12,396,792Non-current assets 4,958,011 4,179,012Current liabilities (1,799,577) (2,404,518)Non-current liabilities (7,932,163) (7,160,146)

Equity 2,545,190 7,011,140

Share of associates’ revenue and profits:Revenue 7,165,958 11,809,341

Profits 534,050 875,458

Carrying amount of the investments 2,545,190 7,011,140

78




11 INVESTMENT PROPERTIES

2012 2011QR QR

At 1 January 5,551,835,348 5,262,402,289Additions 172,719,187 7,489,831Transferred to property, plant and equipment (Note 12) - (8,725,056)Transferred from property, plant and equipment (Note 12) - 3,029,215Net gain from fair value adjustment 388,792,483 287,639,069

At 31 December 6,113,347,018 5,551,835,348

Notes:

(i) Investment properties are stated at fair value, which has been determined based on external valuations performed by an accredited independent valuer. The valuations were performed by an accredited independent valuer with a recognised and relevant professional qualification and with recent experience in the location and category of the investment property being valued. As set out in Note 32, in arriving at the estimates of market values, the valuer has used its market knowledge and professional judgement and not only relied on historical transactional comparables.

(ii) Investment properties are located in the State of Qatar.

(iii) The encumbrances and liens on the investment properties are disclosed in Note 15.

(iv) The carrying value of investment properties includes capitalised borrowing costs amounting to QR 4,567,381 (2011: QR 106,489) which relates to properties under construction.


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2012


13 ACCOUNTS PAYABLE AND ACCRUALS

2012 2011QR QR

Trade accounts payable 482,912,839 550,157,726Advances from customers and tenants 64,344,137 82,813,475Accruals 24,890,739 36,147,499Social and sports activities levy 28,954,726 13,341,889Other payables 33,075,720 19,619,013

634,178,161 702,079,602

14 AMOUNTS DUE TO RELATED PARTIES

2012 2011Name QR QR

Arab Company for Fiber Products 18,380,528 -El Sewedy Electric Holding 9,145,882 -SEDCO 6,348,624 8,191,986United Industries Company W.L.L. 5,380,957 9,837,057Johnson Controls Air conditioning and Refrigeration Qatar W.L.L. 3,529,196 -El Sewedy Cables Egypt 2,832,613 45,489,053Johnson Controls Air conditioning and Refrigeration INC Dubai 1,693,323 -United Wire Company W.L.L. 1,068,794 7,364Gulf Rocks Company W.L.L. - 8,708,682El Sewedy Cables - Syria - 2,898,215Egyptian Call Center Operator - 1,668,386Gettco Company W.L.L. – Gettco Refrigeration and Airconditioning 670,179 683,317Al Jazi Real Estate Company W.L.L. – Al Jazi Real Estate Branch - 386,475Diwan Al Emara W.L.L. 159,116Al Shaab Group of Companies 110,873 68,828City Pharmacy - 2,712Other related parties 10,590,390 3,846,276

59,751,359 81,947,467

Note:

Related party transactions are disclosed in Note 27.

82




15 INTEREST BEARING LOANS AND BORROWINGS

2012 2011Notes Maturity QR QR

Loan 1 (i) June 2013 298,324,180 265,216,549 Loan 2 (ii) January 2013 440,000,000 241,152,411 Loan 3 (iii) January 2015 101,088,000 151,632,000 Loan 4 (iv) November 2016 57,955,030 73,964,856 Loan 5 (v) December 2016 100,168,750 49,153,500 Loan 6 (vi) May 2012 - 22,900,050 Loan 7 (vii) May 2016 - 7,114,000 Loan 8 (viii) April 2013 - 4,753,527 Loan 9 (ix) November 2014 - 4,160,000 Loan 10 (x) March 2015 - 3,923,501 Loan 11 (xi) June 2012 - 1,826,117 Loan 12 (xii) June 2012 - 1,533,074 Loan 13 (xiii) May 2013 - 928,125 Loan 14 (xiv) April 2012 - 477,601 Loan 15 (xv) November 2017 21,300,492 - Loan 16 (xvi) June 2013 4,077,281 - Loan 17 (xvii) December 2017 7,828,711 - Loan 18 (xviii) October 2019 35,000,000 -

1,065,742,444 828,735,311

Less: Deferred financing cost (897,148) (332,661)

1,064,845,296 828,402,650

Presented in the consolidated statement of financial position as follows:

2012 2011QR QR

Current portion 825,568,489 399,077,202Non-current portion 239,276,807 429,325,448

1,064,845,296 828,402,650

The deferred financing costs consist of arrangement fees. The movements in the deferred financing costs were as follows:

2012 2011QR QR

At 1 January 332,661 464,422Additions during the year 912,506 -Amortised during the year (348,019) (131,761)

At 31 December 897,148 332,661


Notes:

(i) Loan 1 is a USD 93,000,000 import loan facility obtained to refinance the letters of credit. The loan carries interest at commercial rate and the interest is paid at monthly intervals. The facility is repayable within 180 days including the usage period under letter of credits.

(ii) Loan 2 is a secured bridge loan obtained to settle an existing loan and working capital requirements of the Company. The loan carries interest at commercial rates and interest is to be paid on quarterly basis.

(iii) Loan 3 was obtained for the purpose of financing capital expenditure and direct payment to suppliers, contractors and sub-contractors. The loan carries interest at commercial rate and the interest is to be paid quarterly. The facility is repayable in 15 quarterly instalments starting 1 July 2011 and ending 1 January 2015.

(iv) Loan 4 was obtained for construction of an investment property. The loan is secured by a primary mortgage over the same property and corporate guarantee of the Aamal Company Q.S.C. The loan carries interest at commercial market rate and is payable in quarterly instalments.

(v) Loan 5 represents a loan facility obtained in two separate tranches amounting to QR 309,825,000 (USD 85 million) for the purpose of refurbishment and construction of facilities in one of the investment properties. The loan is repayable in 16 equal quarterly instalments for individual tranche, commencing from March 2013. The loan carries interest at commercial rates.

(vi) Loan 6 is a trust receipt banking facility for the purchase of inventories. This loan was fully settled during the year.

(vii) Loan 7 was drawn down on 13 July 2011 to finance the purchase of heavy vehicles. The loan is repayable by 59 equal monthly instalments of QR 131,000 with a last instalment of QR 171,000 with effect from 31 July 2011. The loan carries interests at market rates. During the year this loan has been merged under loan 15.

(viii) Loan 8 was drawn down on 1 January 2011 to finance the purchase of heavy machines. The loan is repayable by 50 equal monthly instalments of QR 300,000 with effect from 31 July 2011. The loan carries interests at market rates. During the year this loan has been merged under loan 15.

(ix) Loan 9 represents a loan obtained during the year 2010, amounting to QR 5,910,000 to finance purchase of delivery trucks. The loan is repayable in 48 equal monthly instalments starting from November 2010. During the year this loan has been merged under loan 17.

(x) Loan 10 represents a loan obtained during the year 2011, amounting to QR 4,956,000 to finance purchase of delivery trucks. The loan is repayable in 48 equal monthly instalments starting from March 2011. During the year this loan has been merged under loan 17.

(xi) Loan 11 represents a short term facility obtained during the year 2011, amounting to QR 1,826,117 to finance purchase of machinery and equipment. During the year this loan has been merged under loan 17.

(xii) Loan 12 represents amounts payable to a supplier for the purchase of machinery. As per the agreement, the loan is settled by semi-annual instalments over the period of five years commencing from 31 December 2007. This loan was fully settled during the year.

(xiii) Loan 13 was drawn down on 31 August 2010 to finance the purchase of heavy equipment and machines. The loan is repayable by 31 equal monthly instalments of QR 55,000 with a last instalment of QR 48,125 with effect from 31 October 2010. The loan carries interest at market rates. During the year this loan has been merged under loan 15.

(xiv) Loan 14 is a short term facility that has been obtained for settlement of letters of credit relating to import of materials and medical equipment. This loan was fully settled during the year.

15 INTEREST BEARING LOANS AND BORROWINGS (continued)




15 INTEREST BEARING LOANS AND BORROWINGS (continued)

xv. Loan 15 is an amalgamation of loan 7,8 and 13. Loan was merged on 15 November 2012 and is payable by 59 equal instalments of QR. 426,000 with a last instalment of QR. 438,326 with effect from 01 October 2013. The loan carries interest at commercial market rates.

xvi. Loan 16 is a trust receipt banking facility obtained for the purchase of inventories. This carried interest at commercial market rates.

xvii. Loan 17 is an amalgamation of above mentioned loans 9, 10 and 11. Loans were amalgamated on 22 October 2012. The loan carries interest at commercial market rates and is payable by 59 equal instalments of QR 160,000 with a last instalment of QR 128,000 with effect from 31 December 2012.

xviii. Loan 18 is an Islamic Financing Arrangement obtained for construction of a manufacturing plant and as of year end balance represents partially drawn amount out of total facility of QR 65,568,000. The loan is secured by joint corporate guarantee by the shareholders. The loan carries profit at Islamic Financing rates and re-payable in quarterly instalments starting from the end of the 24 months grace period from the date of loan drawn.

16 EMPLOYEES’ END OF SERVICE BENEFITS

Movements in the provision reflected in the consolidated statement of financial position were as follows:

2012 2011QR QR

At 1 January 18,664,561 15,118,252Provision made during the year 4,652,765 4,675,886Acquired through business combinations (Note 4) 349,272 -Adjustment due to deconsolidation of a subsidiary (353,981) -End of service benefits paid during the year (4,344,453) (1,129,577)

At 31 December 18,968,164 18,664,561

17 SHARE CAPITAL

2012 2011QR QR

Authorised544,500,000 (2011: 495,000,000) Shares of Qr 10 Each 5,445,000,000 4,950,000,000

2012 2011Number of shares QR Number of shares QR

Issued and fully paidAt 1 January 495,000,000 4,950,000,000 450,000,000 4,500,000,000Issue of bonus shares 49,500,000 495,000,000 45,000,000 450,000,000

At 31 December 544,500,000 5,445,000,000 495,000,000 4,950,000,000

All shares are of same class and carry equal voting rights.

A A M A L A N N U A L R E P O R T 1 2 85

18 LEGAL RESERVE

As required by Qatar Commercial Companies’ Law No. 5 of 2002, 10% of the profit for the year as a minimum should be transferred to legal reserve. The reserve is not normally available for distribution except in the circumstances stipulated in the above mentioned law.

19 REVENUES

2012 2011QR QR

Sale of goods 1,923,605,478 1,619,379,319Rental income 233,117,509 212,648,102Service income 83,940,731 41,216,566Commission, incentives and agency fees 43,220,632 36,893,299

2,283,884,350 1,910,137,286

20 DIRECT COSTS

2012 2011QR QR

Cost of inventories recognised as an expense 1,662,834,433 1,329,705,895Salaries and wages 51,378,568 44,433,734Operating expenses on real estate properties 30,481,504 25,521,372Depreciation (Note 12) 33,294,496 30,492,265Operator’s management fees 11,667,989 11,667,326Provision for obsolete and slow moving inventories (Note 8) 2,208,263 939,857Other operating expenses 45,681,044 26,584,624

1,837,546,297 1,469,345,073

21 OTHER INCOME

2012 2011QR QR

Interest income 2,968,837 1,987,181(Loss)/Profit on disposal of property, plant and equipment (178,620) 76,290Bargain purchase gain (Note 4) 8,360,793 -Miscellaneous income 5,937,830 5,292,497

17,088,840 7,355,968




22 GENERAL AND ADMINISTRATIVE EXPENSES

2012 2011QR QR

Management and employees’ costs 60,185,248 60,088,911Rent 26,282,509 23,795,728Allowance for impairment of trade accounts receivable (Note 6) 13,613,120 4,876,765Insurance and professional fees 2,596,168 1,683,934Communication costs 1,649,155 1,263,206Training and business development 1,095,764 1,125,414Repairs and maintenance 2,532,887 926,039Postage, printing and stationery 541,159 753,256Miscellaneous expenses 24,926,367 19,599,605

133,422,377 114,112,858

23 FINANCE COSTS

2012 2011QR QR

Interest expense 61,636,024 59,583,410Amortisation of deferred financing costs 332,661 131,761

61,968,685 59,715,171

24 BASIC AND DILUTED EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit for the year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. During the year, the Company issued and capitalized bonus shares and accordingly, the previously reported earnings per share have been restated.

2012 2011Profit for the year attributable to equity holders of the parent (QR) 594,892,946 492,153,575Weighted average number of shares outstanding during the year (i) 544,364,249 544,500,000Basic and diluted earnings per share (QR) 1.09 0.90

Notes:

(i) The weighted average number of shares for the purpose of calculating earnings per share has been calculated as follows:

2012 2011Qualifying shares at the beginning of the year 495,000,000 495,000,000Effect of bonus shares issued and capitalised 49,500,000 49,500,000

544,500,000 544,500,000

Less: Treasury shares (135,751) -Weighted average number of shares at the end of the year 544,364,249 544,500,000 (ii) There were no potentially dilutive shares outstanding at any time during the year and hence the diluted

earnings per share is equal to the basic earnings per share.


25 COMMITMENTS

2012 2011QR QR

Estimated capital expenditure approved and contracted for at the year end but not provided for:

Investment properties 8,139,063 73,256,019Property, plant and equipment 63,759,762 2,430,762

71,898,825 75,686,781Operating lease commitments, under non-cancellable lease agreements:

Payable within one year 702,000 12,833,397

702,000 12,833,397

26 CONTINGENT LIABILITIES

The Group had the following contingent liabilities from which it is anticipated that no material liabilities will arise.

2012 2011QR QR

Letters of guarantee 395,702,995 414,501,774

Letters of credit 23,845,528 9,854,896

Notes:

(i) Letters of guarantee include performance, tender and bid bonds and payment guarantees given to suppliers and contractors by the Group in the ordinary course of business, which will mature within twelve months from the reporting date.

(ii) Letters of credit are provided by lodging documents to the bank for purchase of trading goods from foreign suppliers, which will mature within three to six months from the date of the transaction.




27 RELATED PARTY DISCLOSURES

Related party transactions

Related parties represent major shareholders, directors and key management personnel of the Group, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group’s management.

Transactions with related parties included in the consolidated financial statements were as follows:

2012 2011QR QR

Sale of goods and services 208,602,200 40,560,339

Rental income 2,069,386 2,125,876

Purchase of goods and services 454,530,119 512,668,021

Rental expense 23,397,334 9,284,058

Bargain purchase gain 8,360,793 -

Net assets acquired 78,803,585 -

Related party balances

Amounts due from and due to related parties are disclosed in Notes 7 and 14 respectively. These balances do not carry interest and are repayable on mutually agreed dates, generally within one year.

The Group did not record any impairment of receivables relating to amounts due from related parties in either year. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

ParentThe Group’s ultimate parent is Al Faisal Holding Company W.L.L.

Compensation of key management personnel

The remuneration of key management during the year was as follows:

2012 2011QR QR

Short-term benefits 11,323,951 7,207,678Employees’ end of service benefits 405,126 179,947

11,729,077 7,387,625


For management purposes, the Group is organised into business units based on their nature of activities and has four reportable segments and the Head Office as follows:

Industrial manufacturing:

The segment involves manufacturing, wholesale and/or retail distribution of electric cables and tools, aggregates, ready-mix concrete and cement blocks and provision of services in relation to industrial investment, repair and construction of power plants, trading of LED lighting products and management of industrial enterprises. The segment includes the following entities:

• Aamal Cement Industries W.L.L.• Aamal Readymix Branch• Doha Cables Qatar W.L.L. • Senyar Industries Qatar Holding W.L.L.• El Sewedy Cables Qatar W.L.L.• Advanced Pipes and Casts Company W.L.L.• Gulf Rocks Company W.L.L.• Ci-San Trading Company W.L.L.• Innovative Lighting W.L.L.

Trading and distribution:

The segment involves wholesale and/or retail distribution of pharmaceutical and consumable items, home appliances, medical equipment, tyres and lubricants, perfumes and cosmetic items. The segment includes the following entities:

• Ebn Sina Medical Branch• Aamal Medical Branch • Aamal Trading and Distribution Branch• Bottega Verde Qatar Branch• Foot Care Center Branch• Good Life Pharmacy BranchCity Center Pharmacy Branch

Property:

The segment consists of City Center Qatar Branch and Aamal Real Estate Branch which are involved in leasing the facilities of retail outlet complex, real estate investments and property rental businesses.

Managed services:

The segment involves provision of housekeeping and cleaning services, facilities management services, energy services, call centre services, building maintenance and acting as travel agents. The segment includes the following entities:

• Aamal Service Branch • Aamal Travels Branch• Ecco Gulf Co. W.L.L.• Johnson Controls Qatar W.L.L.

28 BONUS SHARES

During the year, the Group issued one share for every ten shares held as of 31 December 2011, amounting to QR 495,000,000, using retained earnings as of 31 December 2011 (2011: one share for every ten shares held as of 31 December 2010, amounting to QR 450,000,000, using retained earnings as of 31 December 2010).

In their meeting held on 4 March 2013, the Board of Directors proposed an issue of bonus shares of 10.1928% of the paid up Share Capital aggregating 55.5 million shares with a nominal value of QR 555 million (2011: QR 495 million) as the dividend distribution for the current financial year subject to the approval of the Shareholders at the General Assembly.

29 SEGMENT INFORMATION



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2012 2011QR QR

Fixed interest rate instruments:Financial assets 111,913,394 20,797,699Financial liabilities (125,264,366) (357,043,647)

(13,350,972) (336,245,948)

Floating interest rate instruments:Financial assets 104,384,810 16,047,561Financial liabilities (941,148,926) (479,216,116)

(836,764,116) (463,168,555)

The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s financial assets and liabilities with floating interest rates.

The following table demonstrates the sensitivity of the consolidated statement of income to reasonably possible changes in interest rates by 25 basis points, with all other variables held constant. The sensitivity of the consolidated statement of income is the effect of the assumed changes in interest rates for one year, based on the floating rate financial assets and financial liabilities held at 31 December. The effect of decreases in interest rates is expected to be equal and opposite to the effect of the increases shown.

Changes inbasis points

Effect onprofit QR

2012Floating interest rate instruments +25 b.p. (2,091,910)

2011Floating interest rate instruments +25 b.p. (1,157,921)

30 FINANCIAL RISK MANAGEMENT

Objectives and policies

The Group’s principal financial liabilities comprise interest bearing loans and borrowings, bank overdrafts, amounts due to related parties and trade accounts payable. The main purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has various financial assets such as trade accounts receivable, amounts due from related parties, bank balances, retention receivable and other receivables, which arise directly from its operations.

The main risks arising from the Group’s financial instruments are market risk, credit risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

Market risk

Market risk is the risk that changes in market prices, such as interest rates and foreign currency exchange rates will affect the Group’s profit, equity or value of

its holding of financial instruments. The objective of market risk management is to manage and control the market risk exposure within acceptable parameters, while optimising return.

Equity price risk

Equity price risk is the risk that the Group’s earnings will be affected as a result of fluctuations in fair value of equity instruments. Equity price risk arises from available-for-sale investments. However the Group’s exposure to equity price risk is minimal as it doesn’t hold significant available-for-sale investments.

Interest rate risk

The Group’s financial assets and liabilities that are subject to interest rate risk comprise bank deposits, interest bearing loans and borrowings and bank overdrafts. At the reporting date, the interest rate profile of the Group’s interest bearing financial instruments was as follows:


30 FINANCIAL RISK MANAGEMENT (continued)

Foreign currency risk

Foreign currency risk is the risk that the value of the financial instruments will fluctuate due to changes in foreign exchange rates.

Trade accounts payable and accrued expenses include amounts due in foreign currencies, mainly US Dollars, UAE Dirhams, Great Britain Pounds (GBP) and Euros, of which the Group has a currency risk primarily on the balances payable in Euros and GBP amounting to QR 17,214,046 (2011: QR 25,825,329).

The Group does not hedge its foreign currency exposure. As both Qatari Riyal and UAE Dirhams are pegged to the US Dollar, balances in US Dollars and UAE Dirhams are not considered to represent significant currency risk to the Group.

The table below indicates the Group’s foreign currency exposure on its monetary assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the QR currency rate against the Euro and GBP, with all other variables held constant, on the consolidated statement of income (due to the fair value of currency sensitive monetary assets and liabilities). The effect of decreases in foreign currency exchange rates is expected to be equal and opposite to the effect of the increases shown.

Increase in foreigncurrency rate

to the QR

Effecton profit

QR

2012 +5% (860,702)

2011 +5% (1,291,266)

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group’s exposure to credit risk is indicated by the carrying amount of its financial assets, which consist principally of trade accounts receivable, retention receivable, amounts due from related parties, other receivables and bank balances.

The Group sells its products and provides services to various parties. It is the Group’s policy that all customers who wish to obtain on credit terms are subject to credit verification procedures to ensure credit worthiness. Each new customer is analysed individually for creditworthiness before the delivery of products or services. Customers that fail to meet the creditworthiness may transact with the Group only on prepayment basis. Property rentals are mostly received in advance or contracted with post dated cheques. In addition, receivable balances are monitored on an ongoing basis and the purchase limits are established for each credit customer, which are reviewed regularly based on the level of past transactions and settlement. The Group’s maximum exposure with regard to trade accounts receivable, net of allowance reflected at the reporting date, was as follows:

2012 2011

Business segment: QR QR

Property 19,386,326 15,861,265Trading and distribution 179,748,274 197,566,957Industrial manufacturing 272,088,493 378,039,163Managed services 14,547,389 25,735,972

485,770,482 617,203,357





Credit risk (continued)

With respect to credit risk arising from the other financial assets of the Group, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments as follows:

2012 2011QR QR

Bank balances 380,960,849 175,417,880Amounts due from related parties 228,283,877 211,572,003Retention and other receivables 103,927,261 28,358,298

713,171,987 415,348,181

The group reduces the exposure of credit risk arising from other financial assets by maintaining bank accounts in reputed banks and providing services only to creditworthy related parties.

The management considers the bank balances and amounts due from related parties as high grade financial assets and trade accounts receivable and other receivables as standard grade financial assets. When a financial asset is identified to be impaired, the management downgrades such assets to impaired category and provides adequate allowances.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity risk 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 and is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans and borrowings.

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of financial assets (e.g. accounts receivable) and projected cash flows from operations. The Group’s terms of sales or services require amounts to be paid within 30-90 days from the invoiced date.


30

FIN

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Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the capital, which the Group defines as total shareholders’ equity, excluding non-controlling interests and the level of dividends to ordinary shareholders.

The Board also seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The Group’s target is to achieve a return on shareholders’ equity (excluding non-controlling interests) greater than the weighted average interest expense on interest bearing loans and borrowings.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic and business conditions and shareholders’ expectation. No changes were made in the objectives, policies or processes during the years ended 31 December 2012 and 31 December 2011.

The Group monitors the capital using a gearing ratio, which is debt divided by capital plus debt. The Group’s policy is to keep the gearing ratio below 40%. The Group includes within debt, interest bearing loans and borrowings, less cash and cash equivalents. Capital includes equity attributable to the equity holders of the parent.

2012 2011QR QR

Interest bearing loans and borrowings 1,064,845,296 828,402,650Less: Cash and cash equivalents (378,144,711) (167,646,482)

Net debt 686,700,585 660,756,168

Total capital 6,408,617,095 5,831,980,475

Capital and net debt 7,095,317,680 6,492,736,643

Gearing ratio 9.7% 10.2%

31 FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments comprise financial assets and financial liabilities.

Financial assets consist of bank balances, short term bank deposits, amounts due from related parties, retention and other receivables and trade accounts receivable. Financial liabilities consist of bank overdrafts, interest bearing loans and borrowings, amounts due to related parties and trade accounts payable.

The fair values of these financial instruments except interest bearing loans and borrowings approximates their carrying values due to the short term maturities of these instruments.

The fair value of interest bearing loans and borrowings are estimated based on discounted cash flows using interest rate currently available for the debt or similar terms and remaining maturities.


Impairment of accounts receivable

An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are past due, are assessed collectively and an allowance applied according to the length of time past due, based on historical recovery rates.

Impairment of inventories

Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision is applied according to the inventory type and the degree of ageing or obsolescence, based on anticipated selling prices.

Impairment of goodwill

Goodwill embedded in the cost of acquisition of subsidiaries and associates are tested for impairment annually. The calculations of value in use for cash generating units relating to real estate projects are most sensitive to the following assumptions:

Gross margin: Gross margins are based on average values achieved in the period preceding the start of the budget period. These are increased over the budget period for anticipated efficiency improvements.

Discount rates: Discount rates represent the current market assessment of the risks specific to each cash generating unit, regarding the time value of money and individual risks of the underlying assets which have not been incorporated in the cash flow estimates.

The discount rate calculation is based on the specific circumstances of the Group and its operating segments and derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on the borrowings the Group is obliged to service. Segment-specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available marked data.

Fair value of investment properties

Investment properties are stated at fair value. The Group used external, independent evaluators to determine the fair value of the investment properties. The independent evaluator uses the market situations, estimated yield and expected future cash flows and the recent real estate transactions with similar characteristics and location of properties for the valuation of investment properties.

Useful lives of property, plant and equipment

The Group’s management determines the estimated useful lives of its property, plant and equipment for calculating depreciation. This estimate is determined after considering the expected usage of the asset, physical wear and tear, technical or commercial obsolescence.

Going concern

The Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satisfied that the Group has the resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the consolidated financial statements continue to be prepared on a going concern basis.

33 INCOME TAX

Certain subsidiaries of the Group, which have non-GCC ownership, are subject to income tax under Qatar Income Tax Law No. 21 of 2009. The income tax is charged on the share of profits attributable to non-GCC shareholders. For the purpose of these consolidated financial statements, the income tax liability of the foreign shareholders has been excluded, given that the non-GCC shareholders have agreed, under the shareholder agreements signed with the Group, to bear the full liability and make necessary payments.

32 SIGNIFICANT ASSUMPTIONS, ACCOUNTING JUDGEMENTS AND ESTIMATES

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