Arabtec Holding PJSC and its subsidiaries

Condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (Unaudited)
Arabtec Holding PJSC and its subsidiaries

Pages

Report on review of condensed consolidated interim financial information 1-4

Condensed consolidated interim statement of financial position 5-6

Condensed consolidated interim statement of profit or loss 7

Condensed consolidated interim statement of comprehensive income 8

Condensed consolidated interim statement of changes in equity 9

Condensed consolidated interim statement of cash flows 10 - 11

Notes to the condensed consolidated interim financial information 12 - 44

 Deloitte & Touche (M.E.)
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REPORT ON REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

August 17th, 2016

The Board of Directors
Arabtec Holding PJSC and its subsidiaries
Dubai
United Arab Emirates

Introduction

We have reviewed the accompanying condensed consolidated interim statement of financial position of
Arabtec Holding PJSC (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as
at 30 June 2020 and the related condensed consolidated interim statements of profit or loss, comprehensive
income, changes in equity and cash flows for the six-month period then ended and other explanatory notes.
Management is responsible for the preparation and presentation of this condensed consolidated interim
financial information in accordance with International Accounting Standard (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 International Standard on Review Engagements 2410 Review
of Interim Financial Information Performed by the 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.

Basis for Adverse Conclusion

1. As disclosed in Note 2, the interim financial information has been prepared on a going concern basis,
which we believe does not conform with International Financial Reporting Standards (IFRS) due to the
matters described in the paragraphs below, which indicate that the Group is not a going concern as at 30
June 2020. Therefore the Group may be unable to realise its assets and discharge its liabilities in the normal
course of business. We were unable to determine the adjustments necessary to this interim financial
information as a result of this matter.

The Group incurred a loss during the six-month period ended 30 June 2020 of AED 794 million, had net
cash used in operating activities of AED 197.9 million and net current liabilities of AED 1,740 million as
at 30 June 2020. As at 30 June 2020, the Group’s losses exceed 50% of its issued share capital and as such
article 302 of the Federal Law No (2) of 2015, requires the Company to call a General Meeting for the
Shareholders to vote on either dissolving the Company or to continue its activity with an appropriate
restructuring plan within 30 days of the issue of the condensed consolidated interim financial information.

Cont’d…

Akbar Ahmad (1141), Anis Sadek (521), Cynthia Corby (995), Georges Najem (809), Mohammad Jallad (1164), Mohammad
Khamees Al Tah (717), Musa Ramahi (872), Mutasem M. Dajani (726), Obada Alkowatly (1056), Rama Padmanabha Acharya (701)
and Samir Madbak (386) are registered practicing auditors with the UAE Ministry of Economy.
REPORT ON REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
(continued)

Basis for Adverse Conclusion (continued)

The Group has a number of secured financing facilities amounting to AED 1,395 million, which, inter alia,
contain covenants requiring the Group to maintain specified financial ratios at specified reporting dates.
These covenants were breached as at and 31 December 2019, which had the effect of the Group’s bank
borrowings being repayable on demand. The Group has been unable to refinance these facilities nor obtain
waivers for the covenant breaches to date.

In performing their assessment of going concern, the Board of Directors have considered forecast cash
flows for a period of 12 months from the date of issuance of the condensed consolidated interim financial
information. The timing and realisation of a number of key assumptions within the forecasts are not wholly
within management’s control and require securing additional financing to fund its operations for the next
12 months, restructuring and obtaining covenant waivers on its existing financing facilities, the settlement
and outcome of ongoing contractual and legal disputes as disclosed in Notes 25 and 26 and the conclusion
of the shareholders’ vote at the General Meeting supporting the continuance of the Group with an
appropriate restructuring plan. Moreover, uncertainties resulting from the anticipated negative impact of
COVID-19 on the sector in which the group operates may materially affect these assumptions, particularly
securing new awards. Due to the significance of the matters above, management have been unable to
conclude on the appropriateness of the going concern basis of preparation of this interim financial information.
2. Based on information provided to us by management, there are investment properties with a carrying
amount of AED 568 million (31 December 2019: AED 568 million) which exhibit indicators of
impairment. Management has not determined if the recoverable amount of the aforementioned investment
properties exceed their carrying amount, which we believe does not conform with International Financial
Reporting Standards (IFRSs). We were unable to determine the adjustments necessary to this amount.
Our audit opinion in the prior year was also modified in respect of this matter.
3. Based on information provided to us by management, the Group has measured revenue by including
variable consideration in the transaction price of certain construction contracts, to the extent that it is highly
probable that a significant reversal in the amount of cumulative revenue recognized will occur when the
uncertainty associated with the variable consideration is subsequently resolved. Management has also
excluded certain forecast contract costs and included the recovery of unapproved back charges and
discounts with certain subcontractors in their estimates of forecast costs to complete when determining the
forecast contract profit or loss. This treatment is not in line with the revenue recognition measurement
criteria and we believe that this does not conform with IFRSs. This information indicates that, had
management constrained its estimates of variable consideration in the transaction price to the extent that it
is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur
when the uncertainty associated with the variable consideration is subsequently resolved and had all forecast
contract costs been included and all unapproved back charges and discounts been excluded in the estimates
of forecast costs, the impact would be as follows:
 revenue would have been increased by AED 82 million for the six month period ended 30 June
2020 (for the year ended 31 December 2019: decreased by AED 710 million), direct costs would
have increased by AED 4 million for the six month period ended 30 June 2020 (for the year ended
31 December 2019: increased by AED 404 million);
 the loss for the six-month period ended 30 June 2020 would have been decreased by
AED 78 million (for the year ended 31 December 2019: increased by AED 1,114 million);
REPORT ON REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
(continued)

Basis for Adverse Conclusion (continued)

 the loss per share would have been decreased by AED 0.06 per share for the six month period ended
30 June 2020 (for the year ended 31 December 2019: increased by AED 0.74 per share);
 amounts due from customers from construction contracts would have been reduced by AED 469
million (31 December 2019: AED 436 million);
 trade and other receivables would have been reduced by AED 14 million (31 December 2019:
AED Nil);
 other current assets would have been reduced by AED 264 million (31 December 2019:
AED 250 million);
 amounts due to customers from construction contracts would have been increased by AED 162
million (31 December 2019: AED 404 million);
 trade and other payables would have been increased by AED 257 million (31 December 2019:
AED 145 million); and
 total equity would have been reduced by AED 1,166 million (31 December 2019:
AED 1,235 million).

We were unable to quantify the impact of the above on the condensed consolidated interim statement
of profit or loss for the six month period ended 30 June 2019. Our audit opinion in the prior year was
also modified in respect of this matter.

4. Based on information provided to us by management, the Group has contract receivables and amounts
due from customers on construction contracts with a total carrying amount of AED 318 million (31
December 2019: AED 302 million) and a provision for contract losses of AED 42 million (31 December
2019: AED 76 million) for which management has not taken into consideration the status of negotiations
with customers at the reporting date which would increase the allowance for expected credit losses, which
we believe does not conform with IFRSs. Had management taken into consideration the status of
negotiations with customers at the reporting date, a total amount of AED 244 million (31 December 2019:
AED 226 million) would have been required to reduce contract receivables, amounts due from customers
on construction contracts and decrease the provision for contract losses, included in trade and other
payables.
Accordingly, general and administrative expenses, the loss for the six-month period ended 30 June 2020
would have been increased by AED 2 million (for the year ended 31 December 2019: AED 226 million),
the loss per share would have been increased AED 0.001 per share (for the year ended 31 December 2019:
AED 0.15 per share) and total equity as at 30 June 2020 would have been decreased by AED 244 million
(31 December 2019: AED 226 million). We were unable to quantify the impact on the condensed
consolidated interim statement of profit or loss for the six month period ended 30 June 2019. Our audit
opinion in the prior year was also modified in respect of this matter.
5. Based on information provided to us by management, the Group’s goodwill and other intangible assets,
include goodwill and intangible assets relating to the Arabtec Construction LLC cash generating unit of
AED 88 million and AED 15 million, respectively, which exhibit indicators of impairment. Management
has not updated their impairment assessment taking into account the revised cash flow forecasts and actual
losses for the period ended 30 June 2020, which we believe does not conform with IFRS. This information
indicates that if these updated cash flows had been considered in the impairment assessment, the
aforementioned goodwill and intangible assets would be decreased by AED 102 million, general and
administrative expenses and the loss for the six-month period ended 30 June 2020 would have increased by
AED 102 million and the loss per share would have increased by AED 0.07 per share.
REPORT ON REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
(continued)

Adverse Conclusion
Our review indicates that, due to the matters described in the basis for adverse conclusion section of our
review report, the accompanying condensed consolidated interim financial information is not prepared, in
all material respects, in accordance with IAS 34 Interim Financial Reporting.

Emphasis of Matters

We draw attention to:

a) Note 25 of the condensed consolidated interim financial information, which describes various
contractual disputes relating to projects which are currently subject to legal and / or a dispute resolution
process and where applicable, amicable settlement negotiations, with the respective employers. The
probable outcome of these contractual disputes cannot be determined with reasonable certainty, as these
legal/dispute resolution proceedings and where applicable, amicable settlement negotiations, are
ongoing.

b) Note 26 of the condensed consolidated interim financial information, which describes that the outcome
of the dispute and claim filed by a non-controlling shareholder of Arabtec Construction W.L.L. Qatar,
a subsidiary of the Group, cannot be determined with reasonable certainty as at the date of this report.

Our review conclusion is not modified in respect of these matters.

Other Matter

In accordance with the communication to listed companies by the Securities and Commodities Authority
dated 7 April 2020 on disclosure of interim financial statements, the Group opted for the exemption of not
issuing the condensed consolidated interim financial information for the three month period ended 31
March 2020.

Deloitte & Touche (M.E.)

Cynthia Corby
Registration No. 995
15 August 2020
Dubai
United Arab Emirates
Arabtec Holding PJSC and its subsidiaries 7

Condensed consolidated interim statement of profit or loss

for the six-month period ended 30 June 2020

Six-month period ended

Notes 30 June
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

Revenue 19 3,025,511 4,213,127

Direct costs (3,640,754) (3,947,045)
--------------------------- ---------------------------
Gross (loss)/profit (615,243) 266,082
Investment income 4,558 3,070
General and administrative expenses (125,971) (206,094)
Other income 1,654 48,327
Finance costs - net (48,364) (53,951)
Share of loss of an associate (10,000) (7,803)
--------------------------- ---------------------------
(Loss)/profit before tax (793,366) 49,631
Income tax expense 16 (247) (679)
--------------------------- ---------------------------
(Loss)/profit after tax for the period (793,613) 48,952
============== ==============

Attributable to
Owners of the Parent (788,384) 57,872
Non-controlling interests (5,229) (8,920)
--------------------------- ---------------------------
(793,613) 48,952
============== ==============
Earnings per share
Basic and diluted (AED) 20 (0.53) 0.04
============== ==============

The accompanying notes form an integral part of these condensed consolidated interim financial information.
Arabtec Holding PJSC and its subsidiaries 8

Condensed consolidated interim statement of comprehensive income

for the six-month period ended 30 June 2020

Six-month period ended

Notes 30 June
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

(Loss)/profit for the period (793,613) 48,952

--------------------------- ---------------------------
Other comprehensive loss

Items that may be reclassified subsequently

to profit or loss:

Net change in foreign currency translation reserve (1,086) (13,741)

--------------------------- ---------------------------
Total comprehensive (loss)/income for the period (794,699) 35,211
============== ==============

Attributable to:
Owners of the Parent (788,641) 49,085
Non-controlling interests (6,058) (13,874)
--------------------------- ---------------------------
(794,699) 35,211
============== ==============

The accompanying notes form an integral part of these condensed consolidated interim financial information.
Arabtec Holding PJSC and its subsidiaries 9

Condensed consolidated interim statement of changes in equity

for the six-month period ended 30 June 2020
Attributable to owners of the Parent
Foreign Retained
currency earnings / Non-
Share Statutory translation Other (accumulated controlling Total
capital reserve reserve reserves losses) Total interests equity
AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

Balance at 31 December 2019 (Audited) 1,500,000 155,909 16,766 (212,648) (671,251) 788,776 (344,858) 443,918

Loss for the period - - - - (788,384) (788,384) (5,229) (793,613)

Other comprehensive loss for the period - - (257) - - (257) (829) (1,086)
----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Total comprehensive loss for the period - - (257) - (788,384) (788,641) (6,058) (794,699)
----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Balance at 30 June 2020 (Unaudited) 1,500,000 155,909 16,509 (212,648) (1,459,635) 135 (350,916) (350,781)
========= ========= ========= ========= ========= ========= ========= =========

Balance at 31 December 2018 (Audited) 1,500,000 155,909 27,603 (212,648) 189,793 1,660,657 (258,399) 1,402,258

Profit/(loss) for the period - - - - 57,872 57,872 (8,920) 48,952

Other comprehensive loss for the period - - (8,787) - - (8,787) (4,954) (13,741)
----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Total comprehensive income/(loss) for the period - - (8,787) - 57,872 49,085 (13,874) 35,211

Dividends declared and paid to shareholders - - - - (75,000) (75,000) - (75,000)

Dividends declared and paid to non-controlling interest - - - - - - (2,000) (2,000)
----------------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Balance at 30 June 2019 (Unaudited) 1,500,000 155,909 18,816 (212,648) 172,665 1,634,742 (274,273) 1,360,469
========= ========= ========= ========= ========= ========= ========= =========

The accompanying notes form an integral part of these condensed consolidated interim financial information.
Arabtec Holding PJSC and its subsidiaries 10

Condensed consolidated interim statement of cash flows

for the six-month period ended 30 June 2020

Six-month period ended

30 June
2020 2019
AED’000 AED’000
(Unaudited) (Unaudited)

Cash flows from operating activities

(Loss)/profit before tax (793,366) 49,631

Adjustments for:
Depreciation on property, plant and equipment 71,001 73,866
Finance costs - net 43,228 53,951
Provision for employees' end of service benefits 23,077 27,255
Impairment losses on financial assets 12,325 -
Share of loss from associate 10,000 7,803
Depreciation of right-of-use assets 6,686 5,550
Investment income (4,558) (3,070)
Finance costs related to lease liabilities 2,621 2,469
Net fair value change in non-current receivables and payables 2,515 (1,737)
Amortisation of intangible assets 500 522
Gain on sale of property, plant and equipment (216) (54,586)
Reversal of deferred tax asset 58 -
Loss on disposal of an investment property - 408
Depreciation on investment properties - 27

Operating cash flows before changes in operating (626,129) 162,089

assets and liabilities
Increase in inventories (22,464) (7,851)
Decrease/(increase) in trade and other receivables, including
retentions receivables 144,334 (164,581)
(Increase)/decrease in due from customers on
construction contracts (144,017) 176,549
Decrease in advances paid to suppliers and sub-contractors 247,933 201,521
(Increase)/decrease in due from related parties (31,083) 2,669
Increase in other current assets (141,278) (36,342)
Decrease in other non-current assets 59,389 -
Increase in trade and other payables, including retentions payable 432,148 75,125
Increase/(decrease) in due to customers on construction contracts 104,385 (16,539)
Decrease in advances received from customers (208,018) (322,973)
Increase in due to related parties 18,060 10,884

Cash (used in)/generated from operating activities (166,740) 80,551

Employees' end of service benefits paid (30,664) (19,673)
Income tax paid (487) (2,274)

Net cash (used in)/generated from operating activities (197,891) 58,604

The accompanying notes form an integral part of these condensed consolidated interim financial information.
Arabtec Holding PJSC and its subsidiaries 11

Condensed consolidated interim statement of cash flows

for the six-month period ended 30 June 2020 (continued)

Six-month period ended

30 June
2020 2019
AED’000 AED’000
(Unaudited) (Unaudited)

Cash flows from investing activities

Movement in margin deposits maturing after 3 months 124,502 -
Purchase of property, plant and equipment (49,344) (21,268)
(Increase)/decrease in other financial assets (18,678) 49,742
Investment income received 4,558 3,070
Proceeds from disposal of property, plant and equipment 2,456 81,780
Purchase of other intangible assets - (44)
Proceeds from disposal of investment properties - 1,304

Net cash generated from investing activities 63,494 114,584

Cash flows from financing activities

Proceeds from additional/(repayment of) borrowings, net 68,549 (229,247)
Payments for the principal portion of the lease liabilities (4,879) (6,736)
Interest paid (45,849) (53,951)
Dividends paid to shareholders - (75,000)
Dividends paid to non-controlling interests - (2,000)

Net cash generated from/(used in) financing activities 17,821 (366,934)

Net decrease in cash and cash equivalents (116,576) (193,746)

Cash and cash equivalents at the beginning of the period 302,415 874,898

Net foreign currency translation difference (1,086) (13,741)

Cash and cash equivalents at the end of the period (Note 14) 184,753 667,411

The accompanying notes form an integral part of these condensed consolidated interim financial information.
Arabtec Holding PJSC and its subsidiaries 12

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020

1. General information

Arabtec Holding PJSC (the “Company”) is a Public Joint Stock Company established under the laws of the
United Arab Emirates (UAE) pursuant to the resolution of the Department of Economic Development,
Dubai, number 71 dated 2 July 2004. The Company commenced operations on 20 September 2004. The
Company's shares are listed on the Dubai Financial Market (“DFM”). The registered office of the Company
is P.O. Box 3399, Dubai, UAE.

The Group's major shareholder is Aabar Investment PJS whose parent company is Mubadala Investment
Company, which is ultimately owned by the Government of the Emirate of Abu Dhabi.

Arabtec Holding PJSC and its subsidiaries (the “Group”) are primarily engaged in construction of high-rise
towers, buildings and residential villas, in addition to the execution of related services such as drainage,
electrical and mechanical works, provision of ready mix concrete and construction equipment supply and
rental.

The Group also operates in the oil and gas, infrastructure and power sector, facilities management and
property development.

The condensed consolidated interim financial information is reviewed, not audited.

The condensed consolidated interim financial information include the results of operations and financial
position of the Company and its subsidiaries (together referred to as the “Group”). The principal activity,
country of incorporation and ownership interest of the Company in the subsidiaries are set out below:

Subsidiaries, associates and joint operations:

% Holding
(including indirect holding)
30 June 31 December
Name of subsidiary and domicile 2020 2019 Principal activities

Arabtec Construction LLC - Dubai, UAE 100% 100% Civil construction and related
works
Arabtec Construction Syria LLC, 100% 100% Civil construction and related
Syrian Arab Republic works
Arabtec Pakistan (Pvt.) Limited, Pakistan 60% 60% Civil construction and related
works
Arabtec Egypt for Construction SAE, 55% 55% Civil construction and related
Arab Republic of Egypt works
Arabtec Construction LLC 100% 100% Civil construction and related
(Foreign Company), State of Palestine works
Arabtec Construction LLC 100% 100% Civil construction and electrical,
(Jordan foreign working entity), Jordan mechanical plumbing
contracting and related works
Arabtec International Company Limited, 100% 100% Civil construction and related
Republic of Mauritius works
Arabtec Construction India (Pvt) Limited, 63% 63% Civil construction and related
India works
Arabtec Holding PJSC and its subsidiaries 13

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

1. General information (continued)

Subsidiaries, associates and joint operations: (continued)

% Holding
(including indirect holding)
30 June 31 December
Name of subsidiary and domicile 2020 2019 Principal activities

Arabtec Constructions LLC - Abu Dhabi, 100% 100% Civil construction and related
UAE works
Arabtec Precast LLC, UAE 100% 100% Manufacturing of precast
panels
Arabtec Minority Holding Limited, JAFZA, 100% 100% Investment holding company
UAE
Arabtec Building Equipment LLC, UAE 70% 70% Trading and leasing of
construction and building
equipment
Arabtec Engineering Services LLC, UAE 80% 80% Infrastructure construction
works
Arabtec-Envirogreen Facility 100% 100% Building maintenance and
Management Services LLC, UAE cleaning services, facilities
management and security
services
Arabtec Property Development LLC - 100% 100% Real estate, investment,
Abu Dhabi, UAE development and management
Arabtec Property Development LLC - Dubai, 100% 100% Real estate development
UAE
Arabtec Property Management LLC - Dubai, 100% 100% Leasing and management of
UAE third party property
Arabtec Real Estate LLC - Abu Dhabi, 100% 100% Real estate leasing and
UAE management services
Arabtec Real Estate LLC - Dubai, UAE 100% 100% Buying and selling of real
estate
Arabtec Living For Construction LLC, UAE 100% 100% Civil construction and related
works
Arabtec Limited, JAFZA, UAE 100% 100% General trading; commercial
and real estate investments
Arabtec Trading Limited, JAFZA, UAE 100% 100% General trading; commercial
and real estate investments
Arabtec Consolidated Contractors Limited, 50% 50% International business, general
JAFZA, UAE* trading, and investments
Austrian Arabian Ready Mix Concrete Co. 100% 100% Ready mixed concrete
LLC - Dubai, UAE manufacturing
Emirates Falcon Electromechanical Co. 100% 100% Electrical, mechanical and
(EFECO) LLC - Dubai, UAE plumbing contracting
EFECO Qatar W.L.L, Qatar* 49% 49% Electrical, mechanical and
plumbing contracting
EFECO LLC, State of Palestine 100% 100% Electrical, mechanical and
plumbing contracting
Emirates Falcon Electromechanical Co. 100% 100% Electrical, mechanical and
(EFECO) LLC - Abu Dhabi, UAE plumbing contracting
Arabtec Holding PJSC and its subsidiaries 14

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

1. General information (continued)

Subsidiaries, associates and joint operations (continued):

% Holding
(including
indirect holding)
30 June 31 December
Name of subsidiary and domicile 2020 2019 Principal activities

Gulf Steel Industries FZE, UAE 100% 100% Fabrication of steel structure and
profiles
GSI Steel Construction Contracting LLC, 100% 100% Fabrication of steel structure and
UAE profiles
Idrotec Srl, Italy 96% 96% Civil construction and related
works
Nasser Bin Khaled Factory Ready Mix 49% 49% Manufacturing and
Concrete Co. LLC, Qatar* transportation of ready mix
concrete products
Saudi Target Engineering Construction 65% 65% Civil construction and related
Company LLC, Kingdom of Saudi Arabia works
Target Engineering Construction Company 100% 100% Civil construction and related
LLC, UAE works
Target Steel Industries LLC, UAE 97% 97% Fabrication of steel structure and
profiles
Target Engineering Construction Company 100% 100% Civil construction and related
L.L.C, (Foreign Company) Jordan works
Arabtec Egypt for Property Development, 100% 100% Real Estate, investment,
Egypt development and management
Arabtec Gulf for Property Investment LLC, 100% 100% Buying and selling of real estate
UAE as well as holding activities
Arabtec Construction W.L.L., Qatar* 49% 49% Civil construction and related
works

* In entities listed above where the Company owns less than 50% of the equity shares, the Company has
the power over these entities, is exposed to or has rights to variable returns from its involvement with
these entities and has the ability to use its power over these entities to affect its returns and therefore,
exercises effective control. Consequently, these entities are considered as subsidiaries and sub-
subsidiaries of the Company and are consolidated in these consolidated financial statements.

The Company and its subsidiaries have the following branches:

 Arabtec Holding PJSC - Abu Dhabi Branch

 Arabtec Construction LLC, St Petersburg, Russia
 Arabtec Construction LLC, Riyadh, Kingdom of Saudi Arabia
 Arabtec Construction LLC, Fujairah Branch
 Arabtec Construction LLC, Bahrain Branch
 Arabtec Construction LLC, Sharjah Branch
 Idrotec SRL - Abu Dhabi
 ACC Arabtec JV SAL - Syrian Arab Republic Branch
 Target Engineering Construction Company - Dubai Branch
Arabtec Holding PJSC and its subsidiaries 15

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

1. General information (continued)

Subsidiaries, associates and joint operations (continued):

The Company and its subsidiaries have the following branches (continued):

 Target Engineering Construction Company - Sharjah Branch

 Target Engineering Construction Company - Fujairah Branch
 Target Engineering Construction Company WLL - Qatar Branch
 Arabtec Construction LLC - branch, Abu Dhabi
 GSI Steel Construction Contracting LLC - Abu Dhabi Branch
 Gulf Steel Industries FZE - Jordan Branch
 Arabtec Construction LLC - Egypt Branch
 Arabtec Consolidated Contractors Limited - Astana City Branch, Kazakhstan
 Arabtec Engineering Services LLC, Abu Dhabi Branch
 Austrian Arabian Ready-Mix Co LLC - Abu Dhabi Branch
 EFECO - Riyadh, Kingdom of Saudi Arabia
Joint operations of the Group are disclosed in Note 21.

The Group has the following associate over which it exercises significant influence:

% Holding
(including indirect holding)
30 June 31 December
Name of associate and domicile 2020 2019 Principal activities

Depa Plc, Dubai, UAE (“DEPA”) 24.329% 24.329% Luxury fit-out of five star hotels,
yachts and facilities and related
services

2. Going concern

The condensed consolidated interim financial information has been prepared on a going concern basis
notwithstanding the fact that the Group has incurred a loss for the six-month period ended 30 June 2020 of
AED 793.6 million and had net cash used in operating activities of AED 197.9 million and as at 30 June
2020 had net current liabilities of AED 1,740.2 million.

As at 30 June 2020, the Group’s losses exceed 50% of its issued share capital and as such Article 302 of
the UAE Federal Law No (2) of 2015, requires the Company to call a General Assembly to vote on either
dissolving the Company or to continue its activity with an appropriate restructuring plan within 30 days of
the issue of these condensed consolidated interim financial information. Management are in the process of
appointing restructuring specialists.

At 30 June 2020, the Group had cash and bank balances of AED 503.1 million (31 December 2019:
AED 816.9 million). At 30 June 2020, unencumbered cash was AED 370 million (31 December 2019:
AED 481 million). The Group has incurred increased project costs due to the ongoing challenges facing
the construction industry in addition to dealing with social distancing on construction sites, which is
impacting labour and staff productivity.
Arabtec Holding PJSC and its subsidiaries 16

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

2. Going concern (continued)

In performing their assessment of going concern, the Board of Directors have considered forecast cash
flows for the 14 months period from 1 July 2020 to 31 August 2021. The key assumptions included in the
forecast cash flows over this period are:

 A stakeholder had previously committed to make available adequate financial support so as to ensure
the business continuity of the Group as a going concern for a period of 12 months from the signing
of the consolidated financial statements for the year ended 31 December 2019 until 11 June 2021;
 Given the losses of the Group have increased and now exceeds 50% of share capital as at 30 June
2020, in accordance with Article 302 of the Federal Law No (2) of 2015, the Company is required
to call a General Assembly for the Shareholders to vote on either dissolving the Company or to
continue its activity with an appropriate restructuring plan within 30 days of the release of the results
for the reporting period.
 The Group has a number of secured financing facilities that contain covenants requiring the Group
to maintain specified financial ratios and comply with certain other financial covenants. The Group
is currently not in compliance with its financial covenants (see note 17). Securing waivers for
covenant breaches as at 31 December 2019 and re-profiling debt repayments has been assumed based
on discussions with lenders to date and would be part of the restructuring plan;
 The operational and commercial closeout of ongoing and completed projects resulting in
significantly increased cash outflows which is forecasted at double the amount estimated at
31 December 2019;
 Securing tenders contributing to a net cash inflow in the period of less than AED 500 million due to
the estimated timing of awards and commencement of the projects;
 Continuing to implement cost mitigation measures for the reduction of overheads in line with the
Board of Director’s approved plan; and
 Managing working capital commitments to achieve cash flows to mitigate timing differences
between forecast cash receipts from completed and ongoing projects and the associated payments to
subcontractors and supply chain.

Consistent with conditions being experienced across the industry, the continued uncertainty due to turmoil
in the oil and gas market further worsened by the ongoing impact of COVID-19 may materially affect these
assumptions, particularly the timing of financing, new contract awards and our ability to meet project
milestones. At the date of approval of these condensed consolidated interim financial information, our
projects continue to operate and have been affected by lockdown and social distancing measures in the
UAE. Notwithstanding the measures implemented by the Group to prevent and/or detect the virus, the
variety of possible outcomes related to the course of the pandemic and its adverse impact on the regional
and global economy represents a material uncertainty.

The timing and realisation of these matters are not within management's control. The additional uncertainty
in the reporting period of the shareholders’ intentions in the General meeting as required by Article 302 of
the Federal Law No (2) of 2015, to decide on whether to vote on either dissolving the Company or to
continue its activity with an appropriate restructuring plan, have resulted in management being unable to
conclude on the going concern basis of preparation of this condensed consolidated interim financial
information.
Arabtec Holding PJSC and its subsidiaries 17

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

2. Going concern (continued)

The Directors have concluded that, in aggregate, due to the significance of these matters, which are beyond
their control, this may cast significant doubt on the group's ability to continue as a going concern.
Significant disruption to the timing or realisation of the anticipated cash flows could result in the business
being unable to realise its assets and discharge its liabilities in the normal course of business.

On this basis, the directors are unable to determine, notwithstanding the financial support committed by a
stakeholder for 12 months from the date of signing the audit report, 12 June 2020, for the year ended 31
December 2019, if the Group will have adequate resources to continue in operational existence for the
foreseeable future and the uncertainty presented by the requirement for the shareholders to vote for the
Company to continue its activity and therefore if the going concern basis of accounting remains appropriate
as at 30 June 2020.

3. Application of new and revised International Financial Reporting Standards (“IFRS”)

3.1 New and revised IFRS applied with no material effect on the condensed consolidated interim
financial information

The following new and revised IFRS, which became effective for annual periods beginning on or after
1 January 2020, have been adopted in the condensed consolidated interim financial information. The
application of these revised IFRS has not had any material impact on the amounts reported for the current
and prior years but may affect the accounting for future transactions or arrangements.

 Amendment to IFRS 3 Business Combinations relating to definition of a business.

 Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors relating to definition of material.
 Amendments to IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and
Measurement and IFRS 7 Financial Instruments: Disclosures relating to interest rate benchmark
reforms.
 Amendments to References to the Conceptual Framework in IFRS Standards

3.2 New and revised IFRSs in issue but not yet effective

The Group has not early adopted the following new and revised standards that have been issued but are
not yet effective. The management is in the process of assessing the impact of the new requirements.

Effective for
annual periods
New and revised IFRS beginning on or after

IFRS 17 Insurance Contract 1 January 2023

Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Effective date deferred
Investments in Associates and Joint Ventures (2011) relating to the treatment indefinitely. Adoption is
of the sale or contribution of assets from and investor to its associate or joint still permitted.
venture

Management anticipates that these new standards, interpretations and amendments will be adopted in the
Group’s condensed consolidated interim financial information for the period of initial application and
adoption of these new standards, interpretations and amendments are unlikely to have material impact on
the financial information of the Group in the period of initial application.
Arabtec Holding PJSC and its subsidiaries 18

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

4. Basis of preparation and accounting policies

4.1 Basis of preparation

This condensed consolidated interim financial information for the period ended 30 June 2020 has been
prepared in accordance with IAS 34 Interim Financial Reporting.

The condensed consolidated interim financial information has been presented in United Arab Emirates
Dirhams (“AED”) being the functional currency of the Company and presentation currency of the Group.
All numbers are rounded off to the nearest thousand except otherwise stated.

The condensed consolidated interim financial information does not include all information and disclosures
required in the annual financial statements and should be read in conjunction with the Group’s annual
financial statements for the year ended 31 December 2019.

4.2 Significant accounting policies

The accounting policies applied 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 2019 and the notes attached thereto except as stated
in Note 4.3.

4.3 Basis of consolidation

The condensed consolidated interim financial information as at, and for the period ended 30 June 2020
comprises results of the Company and its subsidiaries. The condensed consolidated interim financial
information of the subsidiaries is prepared for the same reporting period as that of the Company, using
consistent accounting policies. All inter-company transactions, profits and balances are eliminated on
consolidation. Subsidiaries are fully consolidated from the date on which control is transferred to the Group
and cease to be consolidated from the date on which control is transferred out of the Group.

5. Critical judgments and key sources of estimation uncertainty

The preparation of the condensed consolidated interim financial information in compliance with IFRS
requires the management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, income and expenses and disclosure of contingent assets and contingent liabilities. Future events
may occur which will cause the assumptions used in arriving at the estimates to change. The effects of any
change in estimates are reflected in the consolidated financial statements as they become reasonably
determinable.

Judgments and estimates are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.

5.1 Critical judgments

In the process of applying the Group’s accounting policies, management has made the following judgments,
apart from those involving estimations, which have the most significant effect on the amounts recognized
in the condensed consolidated interim financial information:
Arabtec Holding PJSC and its subsidiaries 19

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

5. Critical judgments and key sources of estimation uncertainty (continued)

5.1 Critical judgments (continued)

(a) Revenue recognition

Management considers recognizing revenue over time, if one of the following criteria is met, otherwise
revenue will be recognized at a point in time:

a) the customer simultaneously receives and consumes the benefits provided by the Group’s
performance as the Company performs;
b) the Group’s performance creates or enhances an asset that the customer controls as the asset is
created or enhanced; or
c) the Group’s performance does not create an asset with an alternative use to the entity and the entity
has an enforceable right to payment for performance completed to date.

(b) Judgements in determining the timing of satisfaction of performance obligations

The Group generally recognise revenue over time as it performs continuous transfer of control of
good/services to the customers. Because customers simultaneously receives and consumes the benefits
provided and the control transfer takes place over time, revenue is also recognised based on the extent of
transfer/completion of transfer of each performance obligation. In determining the method for measuring
progress for these POs, we have considered the nature of these goods and services as well as the nature of
its performance.

(c) Contract variations

Contract variations are recognised as revenue only to the extent that it is probable that they will not result
in a significant reversal of revenue in subsequent periods. Management constrains revenue from variations
based on prior experience, application of contract terms and the relationship with the customers when
making their judgement.

At the reporting date, management has recorded unapproved variations to the extent they will not result in
significant reversal of revenue in subsequent period. This assessment is done based on the past history of
agreeing variations and the probability of expected outcome from current on-going discussions with the
employers, as well as the fact that unapproved variations are supported by the client appointed engineer’s
instructions.

(d) Contract claims

A claim is an amount that the contractor seeks to collect from the customer or another party as
reimbursements for costs not included in the contract price. A claim may arise from, for example, customer
caused delays, prolongation cost, cost of acceleration of project, program errors in specifications or design,
and disputed variations in contract work. The measurement of the amounts of revenue arising from claims
is subject to a high level of uncertainty and often depends on the outcome of negotiations. Therefore,
claims are only included in contract revenue when the amount has been accepted by the customer or the
customer’s representative, there is a clear contractual entitlement, and or negotiations have reached a stage
that it is highly probably that a significant reversal of revenue will not occur.

As at 30 June 2020, the balance of due from customers on construction contracts includes AED 620 million
(31 December 2019: AED 682 million) that pertains to unapproved contract claims (Note 12).
Arabtec Holding PJSC and its subsidiaries 20

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

5. Critical judgments and key sources of estimation uncertainty (continued)

5.1 Critical judgments (continued)

(e) Impairment of financial assets and due from customers on construction contracts

The loss allowances for financial assets and due from customers on construction contracts are based on
assumptions about risk of default, time value of money and expected loss rates. The Group uses judgement
in making these assumptions and selecting the inputs to the impairment calculation, based on the Group's
past history, existing market conditions as well as forward looking estimates at the end of each reporting
period.

At the reporting date, gross trade, contract and other receivables, contract retentions and gross amounts due
from customer on construction contracts amounted to AED 5,608 million (31 December 2019:
AED 5,615 million), and the expected credit loss allowance was AED 486 million (31 December 2019:
AED 478 million) as set out in Note 11. Any difference between the amounts actually collected in a future
period and the amounts expected, will be recognised in the consolidated income statement in that period.

(f) Recording of contra charges

A contra charge is where the amount of a claim is deducted from another liability. Being a main contractor,
the Group incurs costs on behalf of its subcontractors such as direct payments to suppliers of subcontractor
and/or provision of Group’s resources to assist with work completion. These contra charges are deducted
by the Group on the payment certificates of its subcontractors. The right to set off the claim against the
liability arises only by agreement of both parties involved. Furthermore, the measurement of the amounts
arising from claim is subject to a high level of uncertainty and often depends on the outcome of
negotiations. Therefore, the claims are recorded and offset against liabilities only when the amount has
been accepted by the subcontractor and / or negotiations have reached at an advanced stage such that the
contra charge that would be agreed by the subcontractor can be measured reliably.

(g) Liquidated damages

The Group provides for liquidated damages where there have been significant delays against defined
contractual delivery dates or contractual milestones and it is considered probable that the customer will
successfully pursue these penalties. This requires management to estimate the amount of liquidated
damages payable under the contract based on a combination of an assessment of the contractual terms, the
reasons for any delays and evidence of cause of the delays to assess who is liable under the contract for the
delays and consequently whether the Group is liable for the liquidated damages or not. Furthermore, there
is an assessment by management of any liquidated damages, which can be recovered against subcontractors
or the supply chain due to late delivery against contractual delivery dates, or milestones which are the direct
cause of the delays under the contract with the customer and which the supply chain is liable for. In making
this judgement, management considered the following:
 The outcome of ongoing constructive discussions with the customer regarding certain key delivery
dates and how the delays to the progress of works can be mitigated without impacting any related
contractors or any other project activity which minimises the risk of these related contractors pursuing
contract claims against the customer, which the customer would in turn seek to recover; and
 The outcome of the discussions to date with the customers due to which management believes the risk
of liquidated damages being levied has been mitigated.
Arabtec Holding PJSC and its subsidiaries 21

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

5. Critical judgments and key sources of estimation uncertainty (continued)

5.1 Critical judgments (continued)

(h) Impairment of non-financial assets

The Group assesses goodwill and intangibles with indefinite useful life for impairment annually and other
assets or groups of assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If any such indication of impairment exists, the group
makes an estimate of the asset’s recoverable amount. Individual assets are grouped for impairment
assessment purposes at the lowest level at which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets (‘cash generating unit’ or ‘CGU’). An asset group’s
recoverable amount is the higher of its fair value less costs of disposal and its value in use. Where the
carrying amount of an asset group exceeds its recoverable amount, the asset group is considered impaired
and is written down to its recoverable amount.

The Group records all assets and liabilities acquired in purchase acquisitions, including goodwill, at fair
value. Goodwill is not amortised but is subject, at a minimum, to annual tests for impairment. The initial
goodwill recorded and subsequent impairment analysis require management to make subjective
judgements concerning the recoverable amount of cash-generating units, specifically in relation to cash
flows, profit margins on revenues and discount rate. At 30 June 2020, the carrying value of goodwill
amounted to AED 249 million (31 December 2019: AED 249 million).

The group assesses that the CGUs with a material amount of allocated goodwill, and therefore containing
significant judgment and estimation uncertainty, are Target Engineering Construction Company LLC
(‘Target’) and Arabtec Construction LLC (‘Arabtec’).

Fair value less costs of disposal is the price that would be received to sell the asset in an orderly transaction
between market participants and does not reflect the effects of factors that may be specific to the entity and
not applicable to entities in general. The Group has not calculated the fair value of the CGUs as part of the
goodwill impairment assessment.

Determining an estimation of value in use of the CGU requires the estimation of future cash flows expected
to arise from the CGU and a suitable discount rate to calculate the present value of expected future cash
flows. These calculations use pre-tax cash flow projections based on financial budgets approved by the
Board covering a five-year period which is the primary source of information for the determination of the
value in use.

The assessment performed as at 31 December 2019 remains unchanged and accordingly management
concluded that no impairment exists as of 30 June 2020.

(i) Employees' end of service indemnity

The cost of the end of service benefits and the present value of these benefits obligation are determined
using actuarial valuations. An actuarial valuation involves making various assumptions that may differ
from actual developments in the future. These include the determination of the discount rate and future
salary increases. Due to the complexities involved in the valuation and its long-term nature, a defined
benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed
annually.
Arabtec Holding PJSC and its subsidiaries 22

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

5. Critical judgments and key sources of estimation uncertainty (continued)

5.1 Critical judgments (continued)

(j) Determining the lease term

In determining the lease term, management considers all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise a termination option. Extension options (or
periods after termination options) are only included in the lease term if the lease is reasonably certain to be
extended (or not terminated).

5.2 Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of
the reporting period, that have a significant risk of causing a material adjustment to the carrying amount of
assets and liabilities within the next financial year, are discussed as below:

(a) Cost-to-cost (input method) to measure progress of construction contracts

The Group uses the cost-to-cost (input method) in accounting for its construction contracts. At each
reporting date, the Group is required to estimate the stage of completion and costs to complete on its
construction contracts. This requires the Group to make estimates of future costs to be incurred, based on
work to be performed beyond the reporting date. These estimates also include the cost of potential claims
by subcontractors and the cost of meeting other contractual obligations to the customers. Effects of any
revision to these estimates are reflected in the period in which the estimates are revised. When the expected
contract costs exceeds the total anticipated contract revenue, the total expected loss is recognised
immediately, as soon as foreseen, whether or not work has commenced on these contracts. The Group uses
its commercial team to estimate the costs to complete of construction contracts. Factors such as delays in
expected completion date, changes in the scope of work, changes in material prices, labour costs and other
costs are included in the construction cost estimates based on best estimates updated on a regular basis.

(b) Project cost to complete estimates

At the end of each reporting period, the Group is required to estimate costs to complete contracts.
Estimating costs to complete on such contracts requires the Group to make estimates of future costs to be
incurred, based on work to be performed beyond the end of the reporting period. The Group uses internal
quantity surveyors together with project managers to estimate the costs to complete for construction
contracts. Factors such as changes in material prices, labour costs, defects liability costs and other costs are
included in the contract cost estimates based on best estimates of the contract progress and remaining works
at the year-end. These estimates also include the cost of potential claims by contractors and the cost of
meeting other contractual obligations to the customers.
Arabtec Holding PJSC and its subsidiaries 23

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

5. Critical judgments and key sources of estimation uncertainty (continued)

5.2 Key sources of estimation uncertainty (continued)

(c) Calculation of loss allowance

When measuring ECL, the Group uses reasonable and supportable forward looking information, which is
based on assumptions for the future movement of different economic drivers and how these drivers will
affect each other.

Loss given default is an estimate of the loss arising on default. It is based on the difference between the
contractual cash flows due and those that the Group would expect to receive.

Probability of default constitutes a key input in measuring ECL. Probability of default is an estimate of the
likelihood of default over a given time horizon, the calculation of which includes historical data,
assumptions and expectations of future conditions.

(d) Discounting of lease payments

The lease payments are discounted using the Group’s incremental borrowing rate (“IBR”), due to the
absence of implicit rates in the lease contracts.

Management has applied judgments and estimates to determine the IBR at the commencement of lease,
using borrowing rates that certain financial institutions would charge the Group against financing the
different types of assets it leased over different terms and different ranges of values. Majority of the leases
are present in the UAE and accordingly no adjustment for the economic environment was deemed required.

(e) Defects liability period and provision for maintenance

The Group provides a one-year defects liability commitment to customers from the date of handover of the
project. These are assurance-type warranties and not sold separately. Management’s estimates of the related
provision to record for future cost of rectifying any defects is based on historical experience of costs
incurred in providing maintenance services as well as recent trends that might suggest that past cost may
not be an accurate measure of potential future costs.

(f) Joint operations

The Group reports its interests in jointly controlled entities as joint operations when the Group has direct
right to the assets, and obligations for the liabilities, relating to an arrangement. In this case it accounts for
each of its assets, liabilities and transactions, including its share of those held or incurred jointly, in relation
to the joint operation. Management has evaluated its interests in joint arrangements and has concluded
them to be joint operations.
Arabtec Holding PJSC and its subsidiaries 24

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

6. Segment reporting

Information regarding the Group’s operating segments is set out below in accordance with IFRS 8
Operating Segments. IFRS 8 requires operating segments to be identified on the basis of internal reports
about components of the Group that are regularly reviewed by the “Executive management” who are the
Chief Operating decision-makers in order to allocate resources to the segment and to assess its
performance. The Group CEO is identified as a chief operating decision maker for the Group.

The management of the Group assessed the Group into four key business units; Building, Economic and
Social Infrastructure, Industrial and Other. These businesses are the basis on which the Group reports its
primary segment information to the chief operating decision maker for the purpose of resource allocation
and assessment of segment performance.

The building segment primarily engages in the construction of high-rise towers, commercial and residential
buildings and residential villas including execution of drainage, electrical and mechanical works. The
Economic and Social Infrastructure segment is related to construction of airports, hospitals, museums and
other activities which contributes to the social and economic development and industrial segment is
involved in all works related to, intended to be used for, and/or for clients in the industries of oil and gas.

The Other segment is involved in all other work that does not fall into the previous three segments in
addition to the Company.

The above segments are the basis on which the Group reports its segment information. Transactions
between segments are conducted at estimated market rates on an arm’s length basis and eliminated on
consolidation.
Arabtec Holding PJSC and its subsidiaries 25

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

6. Segment reporting (continued)

Economic
and social
Building infrastructure Industrial Others Eliminations Total
AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

Six-month period ended 30 June 2020 (Unaudited)

Revenue 2,198,804 378,773 599,615 68,923 (220,604) 3,025,511
Direct costs (2,849,016) (383,109) (565,129) (64,104) 220,604 (3,640,754)

Gross profit/(loss) (650,212) (4,336) 34,486 4,819 - (615,243)

Other income and other expenses, net 4,584 347 911 (7,630) (2,000) (3,788)
General and administrative expenses (79,548) (3,624) (12,426) (34,994) 4,621 (125,971)
Finance costs - net (31,423) - (4,857) (9,463) (2,621) (48,364)
Income tax expense (247) - - - - (247)

Net segment results (756,846) (7,613) 18,114 (47,268) - (793,613)

Six-month period ended 30 June 2019 (Unaudited)

Revenue 3,261,202 791,118 329,158 135,068 (303,419) 4,213,127
Direct costs (3,077,402) (757,681) (307,734) (107,647) 303,419 (3,947,045)

Gross profit 183,800 33,437 21,424 27,421 - 266,082

Other income and other expenses, net 54,129 506 1,281 (2,321) (10,000) 43,595
General and administrative expenses (165,458) (4,895) (7,058) (30,683) 2,000 (206,094)
Finance costs - net (39,300) (33) (3,164) (11,455) - (53,952)
Income tax expense (679) - - - - (679)

Net segment results 32,492 29,015 12,483 (17,038) (8,000) 48,952

Arabtec Holding PJSC and its subsidiaries 26

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

6. Segment reporting (continued)

Economic
and social
Building infrastructure Industrial Others Eliminations Total
AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

As at 30 June 2020 (Unaudited)

Segment assets 5,841,947 1,918,697 1,293,017 2,499,124 (1,765,580) 9,787,206

Segment liabilities (7,653,534) (1,931,867) (1,010,232) (1,247,945) 1,705,590 (10,137,988)

As at 31 December 2019 (Audited)

Segment assets 6,580,208 1,925,403 898,603 2,596,400 (1,749,002) 10,251,612

Segment liabilities (7,557,189) (1,936,161) (707,175) (1,296,883) 1,689,714 (9,807,694)

Arabtec Holding PJSC and its subsidiaries 27

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

7. Property, plant and equipment

Plant,
machinery Labour Scaffolding, Properties
Leasehold and office camps and cabins and under
Land land equipment Vehicles buildings Furniture tunnel forms construction Total
AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000
At 31 December 2019
(Audited)
Cost or fair value 53,427 6,302 1,134,482 175,639 580,515 147,336 168,809 11,933 2,278,443
Accumulated depreciation - (2,322) (965,889) (159,984) (385,611) (138,407) (114,034) - (1,766,247)

Net book value 53,427 3,980 168,593 15,655 194,904 8,929 54,775 11,933 512,196

Six-month period ended

30 June 2020 (Unaudited)
Opening net book value 53,427 3,980 168,593 15,655 194,904 8,929 54,775 11,933 512,196
Depreciation charge - (58) (41,361) (5,688) (14,230) (4,283) (5,381) - (71,001)
Additions - - 33,753 11,127 - 2,418 557 1,489 49,344
Disposals - - - (204) (1,340) (660) (36) - (2,240)
Transfers - - 67 159 - - - (226) -

Closing net book value 53,427 3,922 161,052 21,049 179,334 6,404 49,915 13,196 488,299

At 30 June 2020 (Unaudited)

Cost or fair value 53,427 6,218 1,154,746 183,114 575,845 146,481 163,345 13,196 2,296,372
Accumulated depreciation - 2,296 993,694 162,065 396,511 140,077 113,430 - 1,808,073

Net book value 53,427 3,922 161,052 21,049 179,334 6,404 49,915 13,196 488,299
Arabtec Holding PJSC and its subsidiaries 28

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

8. Investment properties

30 June 31 December
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

Net book value at the beginning of the period/year 593,581 595,320

Disposal during the period/year - (1,712)
Depreciation for the period/year - (27)

Net book value at the end of the period/year 593,581 593,581

The Group's investment properties consist of the following:

• Land in Dubai, UAE amounting to AED 568 million (31 December 2019: AED 568 million). The
carrying value of the land includes incurred development costs of AED 88 million.

At 30 June 2020, management is working with an external party on the development plan of the
property. No impairment provision was recorded as management is confident that the recoverable
amount of the property will be higher than its carrying amount based on its value-in-use. This land is
pledged against the borrowing from Mashreq Bank amounting to AED 353 million
(31 December 2019: AED 353 million).

• Land in Al Ain, UAE amounting to AED 25 million (31 December 2019: AED 25 million),
management has classified this land as investment property and is currently held for appreciation in
the value. The fair value of the land is not expected to be materially different from the carrying value
as at 30 June 2020.

9. Intangible assets

Intangible assets comprise:

30 June 31 December
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

Goodwill 248,741 248,741

Other intangible assets 14,500 15,000

263,241 263,741
Arabtec Holding PJSC and its subsidiaries 29

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

9. Intangible assets (continued)

The other intangible assets represents the Arabtec brand. The Arabtec brand value is amortised over the
expected period of 30 years, following which continuing brand value will be deemed to have been internally
generated and not recognisable as an asset under IFRS.
30 June 31 December
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

Net book value at the beginning of the period/year 15,000 16,000

Amortisation for the period/year (500) (1,000)

Net book value at the end of the period/year 14,500 15,000

Goodwill acquired through business combinations has been allocated for impairment testing purposes to five
cash-generating units ("CGUs"), as per the table below, which are also operating segments. These represent
the lowest level within the Group at which goodwill is monitored for internal management purposes. The
goodwill allocated to Emirates Falcon Electro Mechanical Co. (LLC), Gulf Steel Industries FZC and Idrotec
Srl is not considered to be material to the Group individually or in aggregate and therefore disclosures have
only been included for the Arabtec Construction LLC (‘Arabtec’) and Target Engineering Construction
Company LLC (‘Target’) CGUs in this note.

(a) Goodwill arising on acquisition

30 June 31 December
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

Arabtec Construction LLC 87,963 87,963

Emirates Falcon Electro Mechanical Co. (LLC) 9,086 9,086
Target Engineering Construction Company LLC 134,945 134,945
Gulf Steel Industries FZC 14,842 14,842
Idrotec Srl 1,905 1,905

248,741 248,741

Management has carried out an impairment test of goodwill at the year-end using an external expert and has
concluded that no impairment exists as of 31 December 2019. For this purpose, the recoverable amount of
each CGU has been estimated, and is based on a value-in-use calculation using cash flow projections approved
by the board and covering a five year period. Cash flows beyond the five year period are extrapolated using a
growth rate, which management believes approximates the long-term average growth rate for the industries in
which the CGU's operate.

The assessment performed as at 31 December 2019 remains unchanged and accordingly management
concluded that no impairment exists as of 30 June 2020.
Arabtec Holding PJSC and its subsidiaries 30

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

10. Investment in an associate

a) Details of the Group’s associate at 30 June 2020 and 31 December 2019 is as follows:

Place of Proportion Proportion

incorporation of ownership of voting
Name of the Associate and operation interest power held Principal activity

Depa PLC Dubai, U.A.E. 24.329% 24.329% Construction activities

b) The above investment has been accounted for under the equity method as follows:

30 June 31 December
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

At the beginning of the period/year 99,945 209,328

Share of loss for the period/year (10,000) (106,724)
Share of other comprehensive loss for the period/year - (2,659)

At the end of the period/year 89,945 99,945

On 21 November 2012, the Group acquired shares in Depa PLC (“DEPA”) for AED 241.7 million
representing a 24.329% interest in DEPA’s share capital upon acquisition. The investment in DEPA was
classified as an associate as the Group obtained significant influence over the operating and financial
policies of DEPA.

DEPA operates in the luxury fit-out sector, focusing primarily on hospitality, commercial and residential
property developments through a combination of multiple subsidiaries, joint ventures and associates across
a number of countries and market segments. DEPA operates in the Middle East, North Africa, Europe and
Asia regions. DEPA is listed in the Dubai International Financial Center (DIFC) on NASDAQ Dubai.

Summarised financial information of DEPA as of 30 June 2020 is not available as DEPA has not declared
its results at the date of approval of this condensed consolidated interim financial information.

Furthermore, the Group have estimated the share in the results of DEPA for the six-month period ended 30
June 2020 amounting to AED 10 million.
Arabtec Holding PJSC and its subsidiaries 31

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

11. Trade and other receivables

Current Non-current
30 June 31 December 30 June 31 December
2020 2019 2020 2019
AED’000 AED’000 AED’000 AED’000
(Unaudited) (Audited) (Unaudited) (Audited)

Trade receivables 47,828 54,810 - -

Contract receivables 1,691,554 1,810,358 - -

1,739,382 1,865,168 - -
Retentions receivable 694,017 848,559 692,422 563,790
Expected credit loss allowance (482,636) (474,621) (3,246) (3,246)

1,950,763 2,239,106 689,176 560,544

Contract receivables represent amounts due from customers for construction work rendered by the Group
and certified by the customers' consultants.

Retentions receivable represent amounts withheld by the customers in accordance with contract terms and
conditions. These amounts are to be released upon fulfilment of contractual obligations.

The balance of contract receivables includes two customers' balances totalling AED 137 million
(31 December 2019: AED 211 million) individually representing more than 5% of the total balance of
contract receivables.

A provision has been made for the estimated impairment amounts of trade, contract and retention
receivables of AED 486 million (31 December 2019: AED 478 million). This provision has been
determined based on assumptions about risk of default and expected loss rates. The Group uses judgement
in making these assumptions and selecting the inputs to the impairment calculation, based on the Group's
past history, existing market conditions as well as forward looking estimates at the end of each reporting
period.

Movement in the expected credit loss allowance against trade and other receivables is as follows:

30 June 31 December
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

At the beginning of the period/year 477,867 336,257

Provision made during the period/year 12,325 145,300
Write-off during the period/year (4,282) (3,690)
Reversal of provision during the period/year (28) -

At the end of the period/year 485,882 477,867

Arabtec Holding PJSC and its subsidiaries 32

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

11. Trade and other receivables (continued)

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary
course of business. They are generally due for settlement within 90 days and therefore are all classified as
current. Trade receivables are recognised initially at the amount of consideration that is unconditional
unless they contain significant financing components, when they are recognised at fair value. The Group
holds the trade receivables with the objective to collect the contractual cash flows and therefore measures
them subsequently at amortised cost using the effective interest method.

At 30 June 2020, trade and contract receivables of AED 360 million (31 December 2019: AED 478 million)
were fully performing.

Ageing of past due but not impaired balances:

30 June 31 December
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

Past due for less than 3 months 458,936 425,667

Past due for more than 3 months 437,582 487,283

896,518 912,950

In determining the recoverability of contract and trade receivables, the Group considers any change in the
credit quality of the contract and trade receivables from the date the credit was initially granted up to the
reporting date. At the reporting date, management has taken the current market conditions when assessing
the credit quality of contract and trade receivables. The project directors also hold regular meetings with
contract customers to renegotiate payment terms and to ensure the credit-worthiness of the ultimate end-
users. In addition, the concentration of credit risk is limited due to the customer base being large and
unrelated. Accordingly, taking all of the above into account, the Board of Directors of the Group believe
that there is no further credit provision required in excess of the current expected credit loss allowance
disclosed above.

12. Due from/(to) customers on construction contracts

30 June 31 December
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

Due from customers on construction contracts 2,482,337 2,338,320

Due to customers on construction contracts (338,087) (233,702)

2,144,250 2,104,618

Contract costs incurred plus recognised profits

less recognised losses on contracts in progress 46,868,292 37,123,319
Less: Progress billings (44,724,042) (35,018,701)

2,144,250 2,104,618
Arabtec Holding PJSC and its subsidiaries 33

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

12. Due from/(to) customers on construction contracts (continued)

Significant changes in the gross amounts due from customers and gross amounts due to customers on
construction contracts balances during the year are as follows:

30 June 31 December
2020 2019 Variance
AED’000 AED’000 AED’000
(Unaudited) (Audited)

Due from customers on construction contracts 2,482,337 2,338,320 144,017

Due to customers on construction contracts (338,087) (233,702) (104,385)

2,144,250 2,104,618 39,632

Significant changes are as follows:

30 June
2020
AED’000
(Unaudited)

Conversion to certified receivables (2,918,089)

Revenue recognition 2,957,721

39,632

13. Related party transactions

The Group enters into a variety of transactions with companies and entities that fall within the definition
of related parties as contained in International Accounting Standard 24 Related Party Disclosures on
mutually agreed terms. Related parties comprise the Group's shareholders who control or exercise
significant influence, directors and entities related to them, companies under common ownership and/or
common management and control, their partners and key management personnel. Joint operations partners
and non-controlling interests are considered by the Group as related parties. Management decides on the
terms and conditions of the transactions and services received/rendered from/to related parties as well as
on other charges.
Arabtec Holding PJSC and its subsidiaries 34

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

13. Related party transactions

The following table provides details of the total amount of transactions that have been entered into with
related parties during the six-month periods ended 30 June 2020 and 2019, as well as balances with related
parties as at 30 June 2020 and 31 December 2019:

Six-month period As at
ended 30 June 2020 30 June 2020
Due to Due from
Revenue related parties related parties
AED’000 AED’000 AED’000
(Unaudited) (Unaudited) (Unaudited)

Joint operations 5,458 406,432 548,389

Shareholders 8,326 - 2,160
Associate - 31,762 -
Other related parties 7,907 30,811 28,323

21,691 469,005 578,872

Six-month period As at
ended 30 June 2019 31 December 2019
Due to Due from related
Revenue related parties parties
AED’000 AED’000 AED’000
(Unaudited) (Audited) (Audited)

Joint operations 21,212 390,823 515,976

Shareholders 11,204 - 557
Associate - 29,086 -
Other related parties 16,892 31,036 31,256

49,308 450,945 547,789

The Group, in the ordinary course of business, enters into various transactions including borrowings and
bank deposits with financial institutions, which may be majority-owned by the Government of the Emirate
of Abu Dhabi. The effect of these transactions is included in the condensed consolidated interim financial
information. These transactions are made at terms equivalent to those that prevail in arm’s length
transactions.

As at 30 June 2020, cash and cash equivalents and borrowings include AED 67 million (31 December 2019:
AED 127 million) and AED 461 million (31 December 2019: AED 556 million) respectively, with/from
entities in which the Government of the Emirate of Abu Dhabi has an equity stake. Finance costs include
AED 13 million for the six-month period ended 30 June 2020 (for the six-month period ended 30 June
2019: AED 14 million) relating to balances with these entities.
Arabtec Holding PJSC and its subsidiaries 35

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

13. Related party transactions (continued)

Certain contracting customers of the Group are entities controlled by the Government of the Emirate of
Abu Dhabi. The Group enters into transactions with such entities in the normal course of business
(providing construction services). The impact of these transactions have been summarized as follows:

Due from
customers on
construction Contract Retention Advances
contracts receivables receivables received Revenue
AED’000 AED’000 AED’000 AED’000 AED’000

As at 30 June 2020 and

for the period then
ended (Unaudited) 1,292,465 277,976 279,159 721,885 863,576

As at 31 December 2019
(Audited)/for the period
ended 30 June 2019
(Unaudited) 600,914 341,737 287,325 456,880 1,435,524

Compensation of key management personnel

The remunerations of directors and other key members of management of the Group during the period were
as follows:

Six-month period ended

30 June
2020 2019
AED’000 AED’000
(Unaudited) (Unaudited)

Short term benefits 5,144 6,264

Employees’ benefits 78 267
Bonus - 9,135

14. Cash and bank balances

30 June 31 December
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

Cash in bank 308,167 531,153

Short term bank deposits 194,926 285,750

Cash and bank balances 503,093 816,903

Arabtec Holding PJSC and its subsidiaries 36

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

14. Cash and bank balances (continued)

For the purposes of the condensed consolidated interim statement of cash flows, cash and cash equivalents
comprise bank balances and cash net of bank overdrafts. The details are as follows:
The details are as follows:

30 June 30 June
2020 2019
AED’000 AED’000
(Unaudited) (Unaudited)

Cash and bank balances 503,093 918,598

Less: Deposits with maturity of more than 3 months - (40,912)
Less: Bank overdrafts (318,340) (210,275)

Cash and cash equivalents for the purpose of statement of cash flows 184,753 667,411

15. Other financial assets

Current Non-current
30 June 31 December 30 June 31 December
2020 2019 2020 2019
AED’000 AED’000 AED’000 AED’000
(Unaudited) (Audited) (Unaudited) (Audited)
Financial assets at fair value through
other comprehensive income (OCI)
Unquoted equity shares - - 17,282 17,282

Financial assets at amortised cost

Fixed deposits under lien 81,048 64,997 -
Margin deposits 112,609 109,982 - -

193,657 174,979 - -

193,657 174,979 17,282 17,282

Arabtec Holding PJSC and its subsidiaries 37

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

16. Income tax expense

The Group is subject to taxation on its operations except in the United Arab Emirates and Bahrain. Income
in countries of operations is subject to tax at rates ranging between 5% and 34%.

The major components of income tax expense in the condensed consolidated interim statement of profit or
loss are:

Six-month period ended

30 June
2020 2019
AED’000 AED’000
(Unaudited) (Unaudited)
Income taxes
Current tax expense 305 2,808
Deferred tax income relating to the origination
of temporary differences (58) (2,129)

Total income tax expense 247 679

Six-month period ended

30 June
2020 2019
AED’000 AED’000
(Unaudited) (Unaudited)

(Loss)/income before tax (285) 49,631

Income tax expense (247) (679)

The income tax expense in the condensed consolidated interim statement of profit or loss is at the applicable
tax rate of the respective subsidiaries in the condensed consolidated interim financial information.

17. Bank borrowings

The Group has obtained bank borrowings (including bank overdrafts) from several commercial banks,
mainly to fund working capital requirements.

Current Non-current
30 June 31 December 30 June 31 December
2020 2019 2020 2019
AED’000 AED’000 AED’000 AED’000
(Unaudited) (Audited) (Unaudited) (Audited)

Bank overdrafts 318,460 389,986 - -

Acceptances 189,094 242,607 - -
Project payment certificate
discounting 56,387 23,722 - -
Trust receipts 165,997 54,880 - -
Term loans 878,352 900,422 198,056 197,826

Total borrowings 1,608,290 1,611,617 198,056 197,826

Arabtec Holding PJSC and its subsidiaries 38

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

17. Bank borrowings (continued)

The bank facilities are subject to certain restrictive covenants on overall borrowings outstanding at any
time, including:

 Irrevocable assignment of project proceeds to the financing banks to be confirmed by the customers.
 Irrevocable undertaking by a subsidiary to deposit the proceeds of projects financed by banks into the
specific accounts maintained with the financing banks.
 Assignment of concession rights on property.
 Assignment of sub-contractors’ performance bonds in favour of the financing banks for specific
contracts.
 Assignment of leasehold rights and insurance over property.
 Minimum net worth requirements.
 Maximum leverage ratio requirements.
 Corporate guarantees of subsidiaries and the Company.
 Pledge of purchased shares of other companies.

At 30 June 2020, non-current portion of some of the term loans amounting to AED 629 million
(31 December 2019: AED 657 million) have been reclassified to current as a result of the Group breaching
the debt covenants of the respective loans which results in each of them becoming repayable on demand in
line with the loan agreement.

18. Share capital

30 June 31 December
2020 2019
AED’000 AED’000
(Unaudited) (Audited)

Authorised, issued and fully paid up:

1,500,000,000 shares of AED 1 each 1,500,000 1,500,000

19. Revenue

The Group derives its revenue from contracts with customers for the transfer of goods and services over
time and at a point in time in the following major product lines.

Six-month period ended

30 June
2020 2019
AED’000 AED’000
(Unaudited) (Unaudited)

Construction revenue - over time 2,986,714 4,189,413

Sale of ready mix - at a point in time 38,797 23,714

Total revenue 3,025,511 4,213,127

Arabtec Holding PJSC and its subsidiaries 39

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

19. Revenue (continued)

The transaction price allocated to (partially) unsatisfied performance obligations at 30 June 2020 are as set
out below.

Six-month period ended

30 June
2020 2019
AED’000 AED’000
(Unaudited) (Unaudited)

Construction revenue - over time 9,486,718 13,959,081

20. (Losses)/earnings per share

(Losses)/earnings per share is calculated by dividing the (loss)/profit attributable to the owners of the Parent
for the six-month ended 30 June 2020, amounting to loss of AED 788 million (six-month ended 30 June
2019: profit of AED 58 million) by the weighted average number of shares outstanding as 30 June 2020 of
1,500,000,000 (30 June 2019: 1,500,000,000).

Six-month period ended

30 June
2020 2019
AED AED
(Unaudited) (Unaudited)

Basic and diluted (loss)/gain per share (0.53) 0.04

21. Joint operations

The Group has the following significant interests in joint operations:

Share in joint
operations

(a) Samsung/Arabtec joint operation project, UAE 40%

(b) Six Construct/Arabtec joint operation projects, UAE 50%
(c) Samsung/Six Construct/Arabtec joint operation project, UAE 30%
(d) Arabtec/Max Bogl joint operation projects, UAE 50%
(e) Arabtec/Aktor joint operation projects, UAE 60%
(f) Arabtec/Emirates Sunland joint operation projects, UAE 50%
(g) Arabtec/WCT Engineering joint operation projects, UAE 50%
(h) Arabtec/Engineering Enterprises Company joint operation projects, Jordan 50%
(i) Arabtec/Dubai Contracting Company joint operation project, UAE 50%
(j) Target Engineering and Construction Company LLC/ Marintek Middle East 65%
and Asia FLE joint operation project UAE
(k) Arabtec Engineering Services/WCT Engineering joint operation project, UAE 50%
(l) Arabian Construction Company/Arabtec joint operation project, Syria 50%
(m) Arabtec/National Projects and Construction joint operation project, UAE 50%
(n) Arabtec/AI Saad joint operation project, KSA 66.66%
(o) Arabtec/Combined Group Contracting Company Joint operation, Kuwait 60%
(p) TAV/CCC/Arabtec Joint operation, UAE 33%
Arabtec Holding PJSC and its subsidiaries 40

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

21. Joint operations (continued)

Share in joint
operations

(q) Oger Abu Dhabi LLC/Constructora San Jose SA/Arabtec Joint operation, UAE 33%
(r) CCC/Arabtec Joint operation, Kazakhstan 50%
(s) ATC/CCC/DSC Joint Venture Limited, Jordan 33%
(t) ATC/SIAC joint operation project, Egypt 55%
(u) ATC/ Constructor San Jose SA joint operation project, UAE 50%
(v) EFECO/ACC joint operation project, Kazakhstan 40%
(w) Arabtec Al Mukawilon Joint operation, Palestine 60%
(x) ACC Arabtec Joint operation, Lebanon 50%

The Group is entitled to a proportionate share of the joint operations’ assets and revenues and bears a
proportionate share of the liabilities and expenses.

22. Contingencies and commitments

30 June 31 December
2020 2019
AED’000 AED’000
(Unaudited) (Audited)
Contingent liabilities
Performance and bid bonds 5,128,649 5,062,604
Advance payment bonds 1,763,713 1,837,427
Retention bonds 1,436,062 1,316,630
Letters of credit 291,564 357,020
Financial guarantees 43,245 57,985
Labour guarantees 30,145 42,745

Other contingent liabilities

The Group is a defendant in a number of lawsuits in its ordinary course of business. The Group's
management believes that it is only possible, but not probable, that the claimants will succeed. Accordingly,
the Group's management has assessed that the provision currently booked is adequate to cover any liability
arising for such cases. Please refer to Note 26 for details.
Arabtec Holding PJSC and its subsidiaries 41

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

23. Financial instruments

Financial assets
Financial assets at fair value
at amortised through profit
cost or loss Total
AED’000 AED’000 AED’000

At 30 June 2020
Cash and bank balances (Note 14) 503,093 - 503,093
Trade and other receivables (Note 11) 2,639,939 - 2,639,939
Due from related parties (Note 13) 578,872 - 578,872
Other financial assets (Note 15) 193,657 17,282 210,939
Other current assets (excluding prepaid expenses
and due from employees) 525,672 - 525,672
Other non-current assets 151,638 - 151,638
---------------------------- ---------------------------- ----------------------------
4,592,871 17,282 4,610,153

At 31 December 2019
Cash and bank balances (Note 14) 816,903 - 816,903
Trade and other receivables (Note 11) 2,799,650 - 2,799,650
Due from related parties (Note 13) 547,789 - 547,789
Other financial assets (Note 15) 174,979 17,282 192,261
Other current assets (excluding prepaid expenses
and due from employees) 368,660 - 368,660
Other non-current assets 211,027 - 211,027
---------------------------- ---------------------------- ----------------------------
4,919,008 17,282 4,936,290

Other financial
liabilities at
amortised cost
AED’000
At 30 June 2020
Bank borrowings (Note 17) 1,806,346
Trade and other payables, excluding retentions payable 4,964,497
Due to related parties (Note 13) 469,005
Retentions payable 904,176
Lease liabilities 83,457

8,227,481
Arabtec Holding PJSC and its subsidiaries 42

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

23. Financial instruments (continued)

Other financial
liabilities at
amortised cost
AED’000
At 31 December 2019
Bank borrowings (Note 17) 1,809,443
Trade and other payables, excluding retentions payable 4,575,943
Due to related parties (Note 13) 450,945
Retentions payable 861,119
Lease liabilities 88,336

7,785,786

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 is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and challenging conditions, without
incurring unacceptable losses or risking damage to the Group’s reputation. The Group monitors is cash
flows on a 13 week rolling forecast.

The Group has committed credit facilities in place at 30 June 2020 comprising various bilateral existing
loan facilities of AED 1.0 billion (31 December 2019: AED 1.0 billion), which are fully utilized. The group
has working capital facilities which includes funded limits on revolving basis, of which AED 770 million
were utilized as at 30 June 2020 (31 December 2019: AED 580 million). The Group expects to continue to
service its interest and debt repayment obligations and meet its financial obligations as they fall due for at
least 12 months from the issuance of this condensed consolidated interim financial information through
ongoing monitoring by the Executive Management of the Group’s working capital requirements.

24. Seasonality of operations

The results for the period ended 30 June 2020 reflect the results of the Group’s continuing projects and
new projects commenced during the period and are not significantly affected by any seasonal or cyclical
operations.

Management has concluded that this does not constitute “highly seasonal” as considered by IAS 34 Interim
Financial Reporting. Notwithstanding, the results for the six-month period ended 30 June 2020 are not
necessarily indicative of the results that might be expected for the year ending 31 December 2020.

25. Contractual and legal disputes

a. In 2016, a subsidiary of the Group received a letter from an employer claiming significant progress
delays on the programme of works. Consequently, the employer instructed the main contractor to (i)
resolve the payment issue causing delay or (ii) descope certain works from the main contract and
appoint other contractors to carry out remaining works on the descoped areas. The subsidiary has
completed its reduced scope of works.
Management believes that they are not in default in progressing the works and the delays were caused
by action or inaction by the main contractor and the subsidiary has contractual entitlement to an
Extension of Time claim for the delay period.
Arabtec Holding PJSC and its subsidiaries 43

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

25. Contractual and legal disputes (continued)

In April 2019, the employer attempted to encash the subsidiary’s performance bond due to further
delays on the project. The employer was unsuccessful due to legal action taken by the subsidiary in
obtaining a precautionary attachment order.
In December 2019, the court removed the precautionary attachment, and the employer encashed bonds
amounting to AED 97 million.
As at 30 June 2020, the Group has a net receivable of AED 219 million, which Management believes
is recoverable from the main contractor as the Group has contractual entitlement over the completed
works and the quantum of the descoping has been validated by a third-party expert.
In accordance with the contract, legal proceedings are ongoing in the Abu Dhabi Courts to resolve the
dispute regarding the quantum of the descoping and other matters in dispute.

b. In 2018, a subsidiary of the Group took legal action to ratify an arbitral award in its favour of
AED 286 million plus interest. The court proceedings are ongoing and include seeking attachment
orders over certain assets and bank accounts of the employer.
As at 30 June 2020, the Group has a net receivable of AED 200.3 million, which Management believes
is recoverable from the employer as the amount reflects actual work done and the arbitration award is
for a higher amount.

c. In 2011, a subsidiary of the Group took legal action against an employer for non-payment. In 2012, the
subsidiary obtained an order from the Pakistan Courts of AED 65 million in respect of which the
employer has filed an appeal in 2016. The appeal proceedings are ongoing in the Pakistan Courts.
Further, in 2016 the subsidiary obtained an injunction order preventing the employer from encumbering
the plot where the aborted project is located.
As at 30 June 2020, the Group has a net receivable of AED 22.7 million, which Management believes
is recoverable from the employer based on the value of work done and the injunction order.

d. In 2018, a subsidiary of the Group filed for arbitration in the Dubai International Arbitration Centre
against an employer to recover monies due from the employer for, among other things, wrongful
termination of a main contract in respect of which the subsidiary’s 50/50 JV partner has secured an
arbitral award of AED 1.117 billion. A tribunal was formed and the Respondent (employer) then
launched a jurisdiction challenge. The Respondent succeeded with its challenge and a Final Award has
been published subsequent to the report date. The subsidiary’s claims will then have to be prosecuted
in the Dubai Court, i.e. the Special Judicial Committee (with Court of Appeal jurisdiction), which has
been set up by the Government of Dubai to deal with claims against the employer. According to the
Group’s external legal counsel, it is not possible to predict the outcome of this dispute at this stage.
As at 30 June 2020, the Group has a net receivable of AED 250.6 million which Management still
believes to be recoverable from the employer.

e. In 2015, a subsidiary of the Group, together with several other third-parties, was notified by an insurer
of a claim for AED 1.2 billion relating to a fire that occurred at a building in respect of which the
subsidiary was the main contractor in a joint venture with a third-party.
Under the contract, the Dubai Courts have jurisdiction. Given the complexity of the issues, the
subsidiary, together with the majority of the other respondents, is seeking to move the case into
arbitration or DIFC Courts. The subsidiary has engaged external experts to assess the claim. The
proceedings are at an early stage. Due to the early stage, Management are unable to evaluate the likely
outcome of this matter.
Arabtec Holding PJSC and its subsidiaries 44

Notes to the condensed consolidated interim financial information

for the six-month period ended 30 June 2020 (continued)

26. Other matters

During 2016, a non-controlling shareholder of the Group's subsidiary in Qatar (Arabtec Construction
W.L.L.) issued a letter indicating its non-approval or non-authorisation to issue the financial statements of
the subsidiary on the grounds that it accepted no responsibility for the financial position, performance and
management of the subsidiary.

The Group has obtained legal advice that confirms the non-controlling shareholder is responsible in law for
its share of the subsidiary's operations based on the Qatari Commercial Companies Law, and that both
shareholders of the entity are jointly liable for the liabilities of the subsidiary.

During 2017, the shareholder filed a claim against the Group related to the above mentioned matter.
Management believes that the outcome of such a dispute would have no impact on the condensed
consolidated interim results of the Group as a whole or on its total equity.

27. Approval of condensed consolidated interim financial information

These condensed consolidated interim financial information were approved by the Board of Directors and
authorised for issue on 15 August 2020.