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Deyaar Development PJSC Regulatory Filings 2016

Sep 30, 2016

66353_rns_2016-09-30_278324d9-d697-47f2-a01a-41fb62b36187.pdf

Regulatory Filings

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DEYAAR DEVELOPMENT PJSC

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UNAUDITED)

FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016

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CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (Unaudited) for the nine month period ended 3 0 September 2016

Content Pages Independent auditors' report on review of condensed consolidated interim financial information 1 - 2 Condensed consolidated statement of financial position 3 Condensed consolidated statement of profit or loss 4 Condensed consolidated statement of profit or loss and other comprehensive income 5 Condensed consolidated statement of changes in equity 6 Condensed consolidated statement of cash flows 7 Notes to the condensed consolidated interim financial info1mation 8-21

KPMG Lower Gulf Limited Level 12, IT Plaza Dubai Silicon Oasis, Dubai, UAE Tel. +971 (4) 356 9500, Fax +971 (4) 326 3788

Independent Auditors' Report on Review of Condensed Consolidated Interim Financial Information

The Shareholders Deyaar Development PJSC

Introduction

We have reviewed the accompanying 30 September 2016 condensed consolidated interim financial information of Deyaar Development PJSC ("the Company") and its subsidiaries (collectively referred to as "the Group") which comprises:

  • the condensed consolidated statement of financial position as at 30 September 2016;
  • the condensed consolidated statement of profit or loss for the three month and nine month periods ended 30 September 2016;
  • the condensed consolidated statement of profit or loss and other comprehensive income for the three month and nine month periods ended 30 September 2016;
  • the condensed consolidated statement of changes in equity for the nine month period ended 30 September 2016;
  • the condensed consolidated statement of cash flows for the nine month period ended 30 September 2016; and
  • notes to the condensed consolidated interim financial information.

Management is responsible for the preparation and presentation of this condensed consolidated interim financial information in accordance with IAS 34, 'Interim Financial Reporting'. Our responsibility is to express a conclusion on this condensed consolidated interim financial information based on our review.

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Deyaar Development PJSC Independent auditors' report on review of condensed consolidated interim financial information 30 September 2016

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying 30 September 2016 condensed consolidated interim financial information is not prepared, in all material respects, in accordance with IAS 34, 'Interim Financial Reporting'.

KPMit!!lmited Vijendra Nath Malhotra Registration No: 48 Dubai, United Arab Emirates

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 September 2016

30 September 3 I December
2016 2015
Note AED'OOO AED'OOO
(Unaudited) (Audited)
ASSETS
Non-current assets
Property and equipment 311,668 264,927
Investment properties 6 319,880 253,556
Properties held for development and sale 8 320,608 313,543
Trade and other receivables 3,022 5,165
Investments in joint ventures and associates 13 1,244,579 1,181,640
Long term fixed deposits 7 50,218 51,650
Available-for-sale financial assets 21,048 23,893
2,271,023 2,094,374
Current assets
Properties held for development and sale 8 980,379 998,897
Inventories 2,276 2,227
Due from related parties 9 1,953,246 1,951,333
Trade and other receivables 298,963 336,607
Cash and bank balances 751,740 823,340
3,986,604 4,112,404
Total assets 6,257,627 6,206,778
EQUITY
Share capital 5,778,000 5,778,000
Legal reserve 242,529 242,529
Available for sale fair valuation reserve 1,713 4,558
Accumulated losses (1,194,669) (1,3 62,534)
Total equity 4,827,573 4,662,553
LIABILITIES
Non-current liabilities
Borrowings JO 371,634 342,308
Retentions payable 19,708 10,368
Advances from customers 37,422 12,087
Provision for employees' end of service benefits 12,527 10,990
441,291 375,753
Current liabilities
Borrowings 10 110,954 136,540
Trade and other payables 11 743,904 837,359
Retentions payable 1,174 17,499
Advances from customers 120,432 163,061
Due to related parties 9 12,299 14,013
988,763 1,168,472
Total liabilities 1,430,054 1,544,225
Total equity and liabilities 6,257,627 6,206,778

The condxnsed x Ts lidate~ interim financial information was approved by the Board of Directors, and authorised for issue \lfJl 3 U 2 nd s · ned on their behalf by:

S~~;dAib ,< ~~~§'-:\191Chief Executive 0 Chief Financial Officer

The notes on Pp es t 21 are an integral part of these condensed consolidated interim financial information. The independent auditors' report on the review of the condensed consolidated interim financial information is set out on pages I and 2.

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CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

for the nine month period ended 30 September 2016

Nine month ended Three month ended
30 September 30 September 30 September 30 September
2016 2015 2016 2015
Note AED'OOO AED'OOO AED'OOO AED'OOO
(Unaudited) (Unaudited)
(Restated) (Restated)
Revenue 261,210 141,543 126,253 25,324
Direct costs (156,597) (49,510) (83,561) (6,124)
Other operating income 14 30,855 15,444 14,122 8,661
General and administrative expenses (100,536) (110,616) (37,722) (43,072)
Write back of provision I (provision) for
claims		 1,921 (37,871) 2,449 22,955
Gain from fair value adjustment on investment
properties		 6 66,445 16, 176 33,975 17, 173
Write back of provision for impairment against
advances for purchase of properties		 12 6,144 157,876 32,339
Finance cost (13,330) (21,369) (4,361) (6,420)
Finance income 8,814 7,437 2,970 2,612
Share ofresults from joint ventures and
associates		 13 (5,945) 58,756 2,372 (7,332)
Write back of provision for impairment of
investment in associates		 13 68,884
Profit for the period 167,865 177,866 56,497 46, 116
Earnings per share - basic and diluted Fils 2.91 Fils 3.08 Fils 0.98 Fils .80

The notes on pages 8 to 21 are an integral part of these condensed consolidated interim financial information.

The independent auditors' report on the review of the condensed consolidated interim financial information is set out on pages 1 and 2.

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CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

for the nine month period ended 30 September 2016

Nine month ended Three month ended
30 September 30 September 30 September 30 September
2016 2015 2016 2015
AED'OOO AED'OOO AED'OOO AED'OOO
(Unaudited) (Unaudited)
(Restated) (Restated)
Profit for the period 167,865 177,866 56,497 46, 116
Other comprehensive income
Items that are or may be reclassified subsequently
to profit or loss
Change in fair value of available-for-sale financial
assets (2,845) (2, 105) (759) (398)
Total comprehensive income for the period 165,020 175,761 55,738 45,718

The notes on pages 8 to 21 are an integral part of these condensed consolidated interim financial information.

The independent auditors' report on the review of the condensed consolidated interim financial information is set out on pages 1 and 2.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

c---=: ( .. c__ L_, L._; L_; L: L-_., .______] L__j

for the nine month period ended 30 September 2016

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The notes on pages 8 to 21 are an integral part of these condensed consolidated interim financial information.

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

for the nine month period ended 30 September 2016

Nine month ended
30 September 30 September
2016 2015
Note AED'OOO AED'OOO
(Unaudited)
(Restated)
Cash flows from operating activities
Net cash (used in) I generated from operating activities 15 (22,491) 51,048
Cash flows from investing activities
Additions to property and equipment (49,978) {5,432)
Proceeds on reduction of investment in an associate 752
Additions to investment property - net (3 ,247)
Term deposits maturing after three months 241,433 389,747
Income from deposits 8,497 7,151
Net cash generated from investing activities 199,952 388,971
Cash flows from financing activities
Net movement in borrowings 3,740 (150,556)
Finance costs paid (12,801) (20, 108)
Net cash used in financing activities (9,061) (170,664)
Net increase in cash and cash equivalents 168,400 269,355
Cash and cash equivalents, beginning of the period 453,340 439,292
Cash and cash equivalents, end of the period 621,740 708,647
For the purpose of statement of cash flows, cash and cash equivalents comprise:
Cash on hand 3,339 1,282
Current accounts 259,300 208,415
Fixed deposits 539,319 717,762
Cash and bank balances 801,958 927,459
Less : Deposit maturing after 3 months (180,218) (218,812)
Cash and cash equivalents 621,740 708,647

The notes on pages 8 to 21 are an integral pmt of these condensed consolidated interim financial information.

The independent auditors' report on the review of the condensed consolidated interim financial information is set out on pages l and 2.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016

1 Legal status and principal activities

Deyaar Development PJSC ("the Company") was incorporated and registered as a Public Joint Stock Company in the Emirate of Dubai, UAE on 10 July 2007. The registered address of the Company is P. 0. Box 30833, Dubai, United Arab Emirates ("UAE"). The Company is listed on Dubai Financial Market.

The principal activities of the Company and its subsidiaries (together, "the Group") are property investment and development, brokering, facility and property management services.

In the current period, the Company has incorporated a new subsidiaiy, Deyaar Parking Management LLC, to carry out car park rental and management activities.

This condensed consolidated interim financial info1mation has been reviewed, not audited.

2 Basis of preparation and accounting policies

2.1 Basis of preparation

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The condensed consolidated interim financial information for the nine month period ended 30 September 2016 has been prepared in accordance with IAS 34, 'Interim financial reporting'. The condensed consolidated interim financial information should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2015, which have been prepared in accordance with International Financial Repo1iing Standards.

UAE Federal Law no 2of2015 being the Commercial Companies Law ("the UAE Companies Law of 2015") was issued on 1 April 2015 to come into force on 1 July 2015 repealing the old UAE Federal Law No. 8 of 1984 (as amended). Companies are mandated to comply with the UAE Companies Law of 2015 by 3 0 June 2017.

2.2 Significant accounting policies

The accounting policies adopted in the preparation of the condensed consolidated interim financial information are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2015.

2.3 Change in accounting policy (2015)

Revenue from sale of properties

In the previous period (2015), the Group recognised revenue and related cost for sale of properties in the condensed consolidated statement of profit or loss when the risks and rewards of ownership were transferred to the buyer. The significant risks and rewards were deemed to be transferred when the title deed was registered in the name of the buyer, which in the case of prope1iies, generally used to take place only upon completion of construction and physical handover of the property. However, in ce1iain circumstances, equitable interest in the property was considered vested in the buyer before the legal title passes and therefore the risks and rewards of ownership were transferred at that stage. In such cases, provided that the Group had no further substantial acts to complete in connection with the sale of the propetiy, revenue and related cost was recognised when equitable interest in the property had been passed to the buyer.

IFRS 15 Revenue from contracts with customers

In the previous year, the Group reviewed the impact ofIFRS 15 and accordingly elected to early adopt IFRS 15 for its annual consolidated financial statements with effect from 1January2015, as the Group considered it to be a better reflection of its business performance. The Group applied IFRS 15 using the cumulative effect method i.e., by recognising the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of equity as at 1 January 2015.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

2 Basis of preparation and accounting policies (continued)

2.3 Change in accounting policy (2015) (continued)

IFRS 15 Revenue from contracts with customers (continued)

IFRS 15 Revenue from contracts with customers was issued in May 2014 and is effective from annual periods commencing on or after 1 January 2018 either based on a full retrospective or modified application, with early adoption permitted. IFRS 15 replaces existing revenue recognition guidance and outlines a single comprehensive model of accounting for revenue arising from contracts with customers that is based on transfer of control. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity is entitled in exchange for transferring goods or services to a customer.

Impact of early adopting IFRS 15 on the condensed consolidated interim financial information of the Group for the nine month period ended 30 September 2015 is as follows:

i. Condensed consolidated statement of profit or loss

Nine month period ended 30 September
2015 (unaudited)		 As previously
reported
AED'OOO		 Impact of
recognition of
restatement
AED'OOO		 Restated
AED'OOO
Revenue 253,979 (112,436) 141,543
Direct I operating costs (165,981) 116,471 (49,510)
Share ofresults from joint ventures and
associates		 74,856 (16,100) 58,756
Profit for the period 189,931 (12,065) 177,866
Earnings per share attributable to the equity
holders of the Company-
basic and diluted		 Fils 3.29 Fils (0.21) Fils 3.08

ii. Condensed consolidated statement of cash flows

Nine month period ended 30 September
2015 {unaudited}		 As previously
reported
AED'OOO		 Impact of
recognition of
restatement
AED'OOO		 Restated
AED'OOO
Cash flows from operating activities
Profit for the period 189,931 (12,065) 177,866
Share of results from associates and joint
ventures		 (74,856) 16,100 (58,756)
Reversal of provision for impairment of
properties held for development and sale		 (18,831) 10,204 (8,627)
Operating cash flows before payment of
employees' end of service benefits and
changes in working capital (18,087) 14,239 (3,848)
Changes in working capital
Advance from customers - non-current		 140,515 (44,581) 95,934
Advance from customers - current (169,183) 157,017 (12, 166)
Property held for development and sale (56,907) (126,675) (183,582)

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

2 Basis of preparation and accounting policies (continued)

2.3 Change in accounting policy (2015) (continued)

For the cumulative effect of early adoption ofIFRS 15 as an adjustment to opening balance of equity as at I January 2015, the condensed consolidated interim financial information for the nine month period ended 3 0 September 2016 should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2015, which have been prepared in accordance with International Financial Reporting Standards (IFRSs).

3 Estimates and assumptions

The preparation of condensed consolidated interim financial infonnation requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing the condensed consolidated interim financial information, the significant judgements made by the management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2015 .

The Group has an established control framework with respect to the measurement of fair values, and management has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.

The management regularly reviews significant unobservable inputs and valuation adjustments. If third patty information, such as broker quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

  • Level I: quoted prices (unadjusted) in active markets for identical assets or liabilities.

  • Level 2: inputs other than quoted prices included in Level I that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

  • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognizes transfers between levels of the fair value hierarchy at the end of the repo1ting period in which the change has occurred.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

4 Financial risk management

The Group's activities potentially expose it to a variety of financial risks: market risk (including currency risk, price risk, cash flow and fair value interest rate risk), credit risk and liquidity risk.

The condensed consolidated interim financial information does not include all financial risk management information and disclosures required in the annual consolidated financial information, and should be read in conjunction with the Group's annual consolidated financial statements as at 31 December 2015. The Group's financial risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 3 I December 2015.

5 Segmental information

Operating segment:

The Board of Directors are the Group's chief operating decision maker. The Board considers the business of the Group as a whole for the purpose of decision making.

Management has determined the operating segments based on segments identified for the purpose of allocating resources and assessing performance. The Group is organised into two major operating segments: Property development and properties and facilities management.

Management monitors the operating results of its operating segments for the purpose of making strategic decisions about performance assessment. Segment performance is evaluated based on operating profit or loss.

Property
development
activities
AED'OOO		 Property and
facilities
management
AED'OOO		 Total
AED'OOO
Nine month period ended 30 September
2016 (unaudited)
Segment revenues - external 199,958 61,252 261,210
Segment profit 148,513 19,352 167,865
As at 30 September 2016 (unaudited)
Segment assets 6,093,801 163,826 6,257,627
Nine month period ended 30 September 2015
(unaudited)
Segment revenues - external (restated) 89,941 51,602 141,543
Segment profit (restated) 164,738 13,128 177,866
As at 31 December 2015 (audited)
Segment assets 6,062,466 144,312 6,206,778

Geographic information

Total assets located outside the United Arab Emirates as at 30 September 2016 amount to AED 3.3 million (31December2015: AED 3.3 million).

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

6 Investment properties

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UAE
Office		 UAE
Retail		 UAE
Parking		 30 September 31 December
2016		 2015
building
AED'OOO		 units
AED'OOO		 spaces
AED'OOO		 Total
AED'OOO		 Total
AED'OOO
(Unaudited) (Audited)
Fair value hierarchy 3 3 3 3
Fair value at the beginning of
reporting period 85,733 167,823 253,556 329,320
Additions I adjustments (121) (121) 3,362
Transfer to property and
equipment (Note i below) (95,302)
Fair value gain on transfer
from properties held for sale
(Note ii below) 66,445 66,445
Net fair value gain on
valuation of investment
Ero2erties 16,176
Fair value at the end of
re2orting period 85,733 167,702 66,445 319,880 253,556
  • I. In the previous year, the Company had reclassified a plot of land from investment properties to property and equipment. This property was earlier recognized in the consolidated financial statements of the Company in accordance with the fair value accounting policy adopted for the measurement of investment properties and upon reclassification, its carrying value amounting to AED 95.3 million was deemed to be the cost of the property in accordance with the accounting policy adopted for recognition and measurement of property and equipment. This reclassification was a result of the change in use of the property as reflected by the Company's relevant business model. Based on the management's assessment of the fair value of the property reclassified, there was no material difference between the can-ying value of the plot of land and its fair value on the transfer date and accordingly no gain or loss was recognised in the Company's consolidated profit or loss upon transfer.
  • II. During the current period, the Company has reclassifi~d part of its po1tfolio of parking spaces in various buildings from property held for sale to investment properties as a result of change in use of these spaces. The spaces were reclassified to investment properties at their fair value on the date of transfer based on a fair valuation exercise carried out by an external valuer resulting in a fair value gain of AED 66.45 million. The gain was recognised in the consolidated statement of profit or loss in accordance with the accounting policy adopted for the measurement of investment prope1ties.

Bank borrowings are secured against investment propetties for the value of AED 80 million (31 December 2015: AED 80 million).

Valuation processes

Retail units and parking spaces included in the Group's investment properties are valued by independent professionally qualified valuers who hold a recognised relevant professional qualification and have experience in the locations and segments of the investment properties valued. For all investment properties, their CUtTent use equates to the highest and best use. UAE office building is valued by the Groups' finance depattment.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

6 Investment properties (continued)

Valuation processes (continued)

Management believes that there was no material variance in the value of the Group's investment . properties in the current period.

Information about fair value measurements using significant unobservable inputs (Level 3) are as follows:

Sensitivity of
management estimates
Country Segment Valuation Estimate Range of
inputs		 Impact
lower
AED'OOO		 Impact
higher
AED'OOO
Income Estimated
rental value		 AED 100 to AED 230
per sqft per annum		 (913) 913
UAE Office building capitalisation Discount rate 12.29% 10,567 (8,437)

A change of 100 basis points in management's estimate at the repo1ting date would have increased I (decreased) equity and profit or loss by the amounts shown above.

Valuation techniques underlying management's estimation of fair value:

For office building, the valuation was determined using the income capitalisation method based on following significant unobservable inputs:

Estimated rental value (per sqft p.a.) based on the actual location, type and quality of the
prope1ties and current market rents for similar prope1ties;
Cash flow discount rate reflecting current market assessments of the uncertainty in
the amount and timing of cash flows.

For retail units and parking spaces, the valuation was determined using the indicative fair values of these investment properties as at 30 June 2016 provided by an independent firm of surveyor and property consultant. The surveyor has used sales comparison method to determine the fair values of retail units and parking spaces.

7 Long term fixed deposits

In 2014, the Company had signed a financial restructuring plan with a financial institution for settling its Wakala deposit amounting to AED 101 million. The key terms of the financial restructuring plan were as follows:

  • The financial institution will make a 20% of the outstanding amount as a down payment upon signing the restructuring plan;
  • 65% of the amount will be paid in monthly predetermined instalments, over a period of 12 years and will carry interest rate of 2% per annum; and
  • The remaining 15% amount will be converted into convertible contingent instruments and will be settled in cash or the financial institution's equity shares or combination of both after a period of , 12 years. This will carry a profit rate of 1 % payment in kind.

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

7 Long term fixed deposits (continued)

In 2014, upon signing the restructuring plan, and considering its key terms, management had recognized an impai1ment charge of AED 15.3 million and the present value impact of AED 6.7 million on non-current fixed deposit. In 2015, the Company had received AED 2.3 million against conve1tible contingent instruments and accordingly had written back the impairment charge by an equivalent amount.

As at 30 September 2016, the Company has cumulatively received AED 31.4 million (31 December 2015: AED 30.3 million) from the financial institution towards the repayment of deposit including early repayment of some of the instalments. The balance outstanding amount has been classified as non-current in accordance with the agreement.

8 Properties held for development and sale

Management's assessment of the net realisable value of the properties held for development and sale resulted in a net reversal of impairment amounting to AED 2.4 million (Reversal for impairment for the year ended 31December2015: AED 9.1 million and for nine month period ended 30 September 2015: AED 8. 6 million), which was recognized in the condensed consolidated statement of profit or loss under "direct costs".

Net realisable value has been dete1mined on the basis of committed sale price if the remaining receivable amount is lower than the current market value of the units booked by customers. For units not yet booked by customers, net realisable value takes into consideration the current market.

In the current period, the Company has reclassified part of its po1tfolio of parking spaces in various buildings from prope1ty held for sale to investment properties based on change in use.

Residential units in a building and a plot of a land with a total carrying value of AED 271.8 million (31December2015: AED 290. 7 million) are mortgaged under Islamic finance obligations (Note 10).

In the cun·ent period, the Company has recognised an amount of AED 137.4 million (for nine month period ended 30 September 2015: AED 45.5 million) in condensed consolidated statement of profit or loss under "directs costs" against revenue recognised of AED 175 .4 million (for nine month period ended 30 September 2015: AED 66.8 million).

For land held for future development and use amounting to AED 424.5 million as at the repo1ting date (31December2015: AED 424.5 million), management is currently evaluating feasibility of the projects and considering alternative viable and profitable options.

9 Related party transactions and balances

Related patties include the significant shareholders, key management personnel, associates, joint ventures, directors and businesses which are controlled or jointly controlled, directly or indirectly, by the significant shareholders or directors.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

9 Related party transactions and balances (continued)

(a) Related party transactions

During the period, the Group entered into the following significant transactions with related parties:

Nine month Nine month
period ended period ended
30 September 2016 30 September 2015
AED'OOO AED'OOO
(Unaudited) (Unaudited)
Other operating income/finance income
A significant shareholder		 4,550 2,530
A joint venture 1, 120

(b) Remuneration of key management personnel

Nine month Nine month
period ended period ended
30 September 2016 30 September 2015
AED'OOO AED'OOO
(Unaudited) (Unaudited)
Compensation to key management personnel
Salaries and other short term employee benefits		 9,402 10,724
Termination and post-employment benefits 475 332
Directors' fees 1,013 1,013
10,890 12,069

(c) Due from related parties comprises:

30 September 2016
AED'OOO		 31 December 2015
AED'OOO
(Unaudited) (Audited)
Current
Due from joint ventures 15,124 15,106
Due from other related parties 1,938,122 1,936,227
1,953,246 1,951,333

Cash and cash equivalents include fixed deposits of AED 320 million (31December2015: AED 330 million) deposited with a significant shareholder of the Company (a bank), at market prevailing profit rates.

At 30 September 2016, the Group had bank borrowings from the significant shareholder (a bank) of AED 326.9 million (31December2015: AED 264.1 million) at market prevailing profit rates.

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

9 Related party transactions and balances (continued)

(c) Due from related parties comprises: (continued)

In 2010, the Group entered into a sale and purchase agreement with a related party to sell properties with a carrying value of AED 1,337.8 million and rights to purchase plots amounting to AED 899.6 million. The sale consideration as per the initial agreement was AED 3,647.5 million.

The salient terms and conditions of the transaction were as follows:

    1. The sale consideration is receivable on or before 1 September 2016;
    1. The sale consideration can be settled in cash or in kind or a combination of both, at the discretion of the purchaser. Where settlement is in kind, the fair value of the assets transferred will be determined by an independent valuation expe11, to be selected by the seller and purchaser; and
  • lit. The commitment on the remaining purchase price of the land held for development remains with the Group.

Following the amendments to the original agreement, the sale consideration was reduced by approximately AED 731 million, as a result of the purchaser's commitment to settle this balance on demand, on or before 3 1 December 2016, in cash or in kind, or a combination of both.

During 2014, pursuant to the addendum to original sale and purchase agreement for a plot of land with the master developer, the Group had entered into an amendment agreement with the related party, which resulted in a further reduction of the sale consideration by AED 141 million. Further, the related paity had also transferred plots of land thereby settling receivable balance of AED 669.3 million against the outstanding receivable.

In 2015, the Company settled an amount of AED 108 million relating to certain plots on behalf of the related paity resulting in reduction of the Company's commitments. The receivable amount is reflected in the books of the Company after deducting the future committed payments of AED 170 million (Note 16) relating to rights to purchase plots from the sale consideration as per the sale and purchase agreement. Management is currently evaluating various options and expects that the balance will be settled during current year.

(d) Due to related parties comprises:

30 September 2016 31 December 2015
AED'OOO AED'OOO
(Unaudited) (Audited)
Current
Due to a significant shareholder 1,714
Due to a joint venture partner 12,299 12,299
12,299 14,013

10 Borrowings

30 September 2016 31 December 2015
AED'OOO AED'OOO
(Unaudited) (Audited)
Non-current 371,634 342,308
Current 110,954 136,540
Total borrowings 482,588 478,848

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

10 Borrowings (continued)

Islamic finance
obligations
AED'OOO
1 January 2015 650, 161
Repayments (171,313)
3 1 December 2015 - audited 478,848
l January 2016 478,848
Addition during the year 100,000
Repayments (96,260)
30 September 2016 - unaudited 482,588

The Islamic finance obligations represent Ijarah and Murabaha facilities obtained from Dubai Islamic Bank PJSC (a significant shareholder), and from other local Islamic banks. The facilities were availed to finance the properties under construction. In the previous year, the Group signed restructuring agreements ofljarah and Murabaha facilities with the banks, whereby these facilities had been restructured into finance obligations repayable over five to seven years, with a revised profit rates. The Islamic finance obligations carry market prevailing profit rates, and are repayable in monthly or quarterly instalments over a period of one to seven years from the reporting date (31 December 2015: one to eight years).

The Islamic finance obligations are secured by mortgages over properties classified under property held for development and sale (Note 8), property and equipment and investment property (Note 6).

The borrowings include an amount of AED 326.9 million (31December2015: AED 264.1 million) obtained from the significant shareholder. Refer note 9.

11 Trade and other payables

At 31 December 2015, trade and other payables included a provision for claim of AED 65 .9 million relating to claim made by third party against the Company. The provision was based on management's best estimate after considering the potential cash flows in respect of the claim. In the current period, management has settled an amount of AED 63.5 million and written back the provision of AED 2.4 million based on management's assessment of this claim.

12 Write back of net provision for impairment against advance for purchase of properties

In 2014, the Company recorded an impairment provision of AED 68.6 million against advance paid for purchase of properties of AED 114 million, which was expected to be swapped with other plots of land and cash payment due to changes in the master development plan. The provision was reflective of the initial assessment which was determined on the basis of management's best estimate of the value of the new land expected to be received by the Company. In March 2015, the master developer proposed settlement options to the Company to accommodate the Company for the advance paid for purchase of properties. The write back of provision for the nine month period ended 30 September 2015 was determined on the basis of offers received from the master developer and their fair values as determined by an independent firm of surveyors and property consultant.

In August 2015, the Company had signed a sale and purchase agreement for a new plot of land with the master developer and recognized this land including expected legal I registration charges as at year ended 31 December 2015. On the basis of the fair value of land, cash received and registration charges for land, the Company had written back a net provision of AED 157.8 million during the year ended 31 December 2015 and recorded the land at the net realisable value as assessed and valued by an independent and professionally qualified valuer.

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

13 Investments in joint ventures and associates

In the current period, the management has written back a prov1s1on for impairment against investment in associate amounting to AED 68.8 million based on management assessment of the recoverable amount of the Group's share of assets held by the entity in which associate holds an interest. Management's assessment is based on the indicative fair values of the assets after considering the development progress of the project unde1iaken by the entity. Futihermore, the Group has recognised its share ofresults from joint ventures and associates for the period amounting to AED 5.94 million (nine month period ended 30 September 2015: AED 58. 76 million).

14 Other operating income

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Other operating income mainly includes write-back of liability of AED 13 million pursuant to signing of settlement agreement by the Company and one of its contractors and reversal of provision for bad and doubtful debts recorded in prior years of AED 8.4 million upon receipt of the overdue amount in the current period.

15 Cash flows from operating activities

Nine month period ended 30
September
2016 2015
AED'OOO
AED'OOO
(Unaudited)
(Restated)
Profit for the period 167,865 177,866
Adjustment for
Depreciation 3,237 3,887
Provision for employees' end of service benefits 2,289 2,686
Provision for Doubtful Debts 972 1,345
Reversal of provision for impairment of properties held for
development and sale (2,448) (8,627)
(Reversal of provision) I provision for claims (1,921) 37,871
Reversal of provision of investment in an associate (68,884)
Reversal of provision for impainnent against advance for
purchase of prope1iies (6,144) (157,876)
Gain on fair valuation of investment prope1iy (66,445) (16,176)
Finance income (8,814) (7,437)
Finance costs 13,330 21,369
Share of results from associates and a joint venture 5,945 (58,756)
Operating cash flows before payment of employees' end of
service benefits and changes in working capital 38,982 (3,848)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

15 Cash flows from operating activities (continued)

Nine month period ended
30 SeEtember
2016 2015
AED'OOO AED'OOO
(UQ audite~}
(.Restated)
Operating cash flows before payment of employees' end of
service benefits and changes in working ca~ital 38,982 (3,848)
Payment of employees' end of service benefits (752) (l,696)
Changes in working capital:
Property held for development and sale (net of project cost
accruals) 13,901 (183,582)
Retentions payables - non-current 9,340 2,910
Trade and other receivables - non-current 2,143 31,761
Trade and other receivables - current 36,989 153,879
Inventories (49) (2,509)
Due from related parties (1,913) (62,005)
Retentions payable (16,325) (8,261)
Advance from customers - non Current 25,335 95,934
Advance from customers - current (42,629) (12,166)
Trade and other payables (85,799) 41,137
Due to related parties (1,714) (506)
Net cash (used in) I generated from operating activities (22,491) 51,048

16 Commitments

At 3 0 September 2016, the Group had total commitments of AED 517 million (31 December 2015: AED 643. 7 million) with respect to project related contracts issued as of the end of the period I year net of invoices received and accruals made as at that date. The Group also had commitments with respect to purchase of land of AED 170.4 million (31December2015: AED 170.4 million) (Refer Note 9).

17 Contingent liabilities

At 30 September 2016, the Group had contingent liabilities in respect of performance and other guarantees issued by a bank on behalf of a subsidiary, in the ordinary course of business, from which it is anticipated that no material liabilities will arise, amounting to AED 10.6 million (31 December 2015: AED 26.1 million).

The Company is also a party to certain legal cases in respect of certain plots of land. Based on review of opinion provided by the legal advisors, management is of the opinion that no cash outflow in respect of these claims is expected to be paid by the Company in these legal cases and accordingly no provision is recognized. The Company has elected not to present the complete disclosures as required by IAS 3 7 "Provision and Contingent Liabilities and Contingent Assets" as management is of the view that since the legal claims are sub-judice and are disputed, therefore this information may be prejudicial to their position on these matters. Also refer Note 16.

Cettain other contingent liabilities may arise during the normal course of business, which based on the information presently available, either cannot be quantified at this stage or in the opinion of the management is without any merit. However, in the opinion of management, these contingent liabilities are not likely to result in any cash outflows for the Group.

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NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

18 Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below:

Loans and Available
receivables for-sale
(at amo11ized financial assets
cost) (at fair value) Total
30 September 2016 (unaudited) AED'OOO AED'OOO AED'OOO
Assets as per statement of financial position
Available-for-sale financial assets 21,048 21,048
Trade and other receivables excluding
prepayments, advances to
suppliers/contractors
Due from related patties 85,417
1,953,246		 85,417
1,953,246
Long term fixed deposits
Bank balances 50,218
748,401		 50,218
748,401
2,837,282 21,048 2,858,330
Amortised
cost
30 September 2016 (unaudited) AED'OOO
Liabilities as per statement of financial position
Trade and other payables 743,904
Retentions payable 20,882
Borrowings 482,588
Due to related parties 12,299
1,259,673
Loans and Available
receivables for-sale
(at amortized financial assets
cost) (at fair value) Total
31 December 2015 AED'OOO AED'OOO AED'OOO
Assets as per statement of financial position
Available-for-sale financial assets 23,893 23,893
Trade and other receivables 102,080 102,080
Due from related parties 1,951,333 1,951,333
Long term fixed deposits 51,650 51,650
Bank balances 821,493 821,493
2,926,556 23,893 2,950,449
Amortised
cost
31 December 2015 AED'OOO
Liabilities as per statement of financial position
Trade and other payables 771,392
Retentions payable 27,867
Borrowings 478,848
Due to related parties 14,013

1,292,120

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH PERIOD ENDED 30 SEPTEMBER 2016 (continued)

18 Financial instruments by category (continued)

The following table presents the Group's financial assets that are measured at fair value, by valuation method:

Level 1
AED'OOO		 Total
AED'OOO
As at 30 September 2016 (unaudited)
Available-for-sale financial assets 21,048 21,048
As at 3 1 December 2015 (audited)
Available-for-sale financial assets 23,893 23,893

The carrying value less impairment provision of trade receivables are assumed to approximate their fair values keeping in view the period over which these are expected to be realised. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. Other receivables and payables approximate their fair values.

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