National Marine Dredging : Audited Financial Report 2022

NATIONAL MARINE DREDGING COMPANY PJSC

Reports and consolidated financial statements for the year ended

31 December 2022

NATIONAL MARINE DREDGING COMPANY PJSC

Reports and consolidated financial statements for the year ended 31 December 2022

	Pages
Directors' report	1 - 11
Independent auditor's report	12 - 17
Consolidated statement of financial position	18 - 19
Consolidated statement of profit or loss	20
Consolidated statement of comprehensive income	21
Consolidated statement of changes in equity	22
Consolidated statement of cash flows	23 - 24
Notes to the consolidated financial statements	25 - 104

Deloitte & Touche (M.E.)

Level 11, Al Sila Tower

Abu Dhabi Global Market Square

Al Maryah Island

P.O. Box 990

Abu Dhabi

United Arab Emirates

Tel: [phone]

Fax:[phone]

www.deloitte.com

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF

NATIONAL MARINE DREDGING COMPANY PJSC

REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Opinion

We have audited the consolidated financial statements of National Marine Dredging Company PJSC (the "Company") and its subsidiaries (together referred to as the "Group"), which comprise the consolidated statement of financial position as at 31 December 2022, and the consolidated statement of profit or loss and consolidated statement of other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2022, and its consolidated financial performance and its consolidated cash flows for the year ended in accordance with International Financial Reporting Standards (IFRSs).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the other ethical requirements that are relevant to our audit of the Group's consolidated financial statements in the United Arab Emirates, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other matter

The consolidated financial statements of the Group for the year ended 31 December 2021, were audited by another auditor who expressed an unmodified opinion on those statements on 31 January 2022.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of consolidated financial statements of the current period. These matters were discussed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matters are stated below:

Akbar Ahmad (1141), 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.

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF

NATIONAL MARINE DREDGING COMPANY PJSC (continued)

Key Audit Matters (continued)

Key audit matter			How our audit addressed the key audit matter
Revenue recognition
The Group reported revenue of AED 10,685 million	We performed the following procedures, inter alia, in
during the year ended 31 December 2022. Revenue	respect of revenue recognition:
recognition is considered to be a key area of focus
given there are multiple revenue streams associated	• We obtained an understanding of the business
with the Group which come from various	process flow and performed walkthroughs to
decentralized operational locations.		understand the key processes and identify key
The Groups business involves entering into contractual	controls;
relationships with customers to provide a range of	• We assessed the key controls over revenue to
services with a significant proportion of the Group's	determine if they had been designed and
revenues and profits derived from long term contracts.	implemented appropriately and tested these
Revenue is quantitatively significant to the	controls to determine if they had been operating
consolidated financial statements and requires	effectively throughout the year;
management to apply significant judgements and make	• We performed audit procedures which included
significant estimates when determining the amount of
revenue to be recognised.			inspecting a sample of contracts, reviewing for
					variation	orders, retrospectively	reviewing
The significant judgements applied and estimates	estimated profit and costs to complete and
made in applying the Group's revenue recognition	enquiring of key personnel regarding potential
policies to long-term contracts entered into by the	contract losses;
Group include determining the stage of completion,	• For	material	contracts	identified,	we	have
the timing of revenue recognition and the calculation
reviewed	the	contract	terms and	verified
of the percentage of completion.
		assumptions made in determining the amount of
The nature of these judgements results in them being	revenue to be recognised, including consideration
of discounts, performance penalties and other cost
susceptible	to	management	override	with a
implications of the contract;
consequential impact of revenue being recognised in
an incorrect	period. Consequently, we considered	• We performed analytical procedures by comparing
revenue recognition to be a key audit matter.
	the gross margins for the different types of
The Group's revenue recognition accounting policy	revenue streams to the prior year. If we identified
an	unexpected	margin,	we carried	out	more
is included	in	note 3 to the	consolidated	financial
focused testing on these revenue streams;
statements.
					• We performed procedures to assess whether the
					revenue recognition criteria adopted by Group is
					appropriate and is in accordance with the Group's
					accounting policy and the requirements of IFRSs;
					• We performed testing over manual journal entries
					posted to revenue to assist us in identifying
					unusual or irregular transactions; and
					• We assessed the disclosure in the consolidated
					financial statements relating to revenue
					recognition against the requirements of IFRSs.

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF

NATIONAL MARINE DREDGING COMPANY PJSC (continued)

Key Audit Matters (continued)

Key audit matter

How our audit addressed the key audit matter

Valuation of trade receivables and contract assets

Gross trade and retention receivables and contract

We performed the following procedures in relation to

assets as at 31 December 2022 were AED 3,106

the allowance for ECL:

million and AED 3,115 million respectively, against

which expected credit loss ("ECL") allowances of

• We obtained an understanding of the process of

AED 46 million and AED 28 million were recorded,

measurement of the allowance for ECL;

as reflected in notes 13 and 14. These assets represent

•

We identified

the

relevant

controls over

the

39% of the total assets presented in the consolidated

statement of financial position and include balances of

determination of the allowance for ECL;

AED 146 million which had been outstanding for

• We assessed these controls to determine if they

more than 180 days from the reporting date. Further,

contract assets include AED 558 million which

had been designed and implemented

represents revenue recognised based on unsigned or

appropriately;

verbal contracts.

•

We compared

the

ECL

model developed

by

The Group assesses at each reporting date whether the

management against the requirements of IFRSs

and reviewed the methodology against accepted

financial assets carried

at

amortised cost

are

credit-

best practice;

impaired. Management has applied the simplified

approach for measurement of ECL allowances relating

•

We tested

the

arithmetical

accuracy

of

the

to trade receivables and contract assets whereby the

model;

ECL allowance is measured at an amount equal to

lifetime expected credit losses.

• We tested key assumptions, such as those used

The ECL

model involves

the

use

of

various

to calculate

the

likelihood of

default

and

the

subsequent

loss

on

default,

by comparing

to

assumptions, macro-economic

factors and

study of

historical

data.

We

also

considered

the

historical

trends relating

to

the

Group's

trade

incorporation

of

forwardlooking

factors

to

collections experience.

reflect the impact of future events on expected

The directors apply significant judgement and make

credit losses;

significant estimates when determining how much to

• We agreed the results of the output of the ECL

record as the ECL allowance. Consequently, together

model developed

by

management

to

the

with the

significant

delays

in

collecting

trade

amounts reported in the consolidated financial

receivables, we have considered the carrying amount

statements; and

of trade receivables and contract assets to be a key

audit matter.

• We assessed the disclosure in the consolidated

The Group's disclosures

relating

to this

matter are

financial

statements

relating

to

this

matter

against the requirements of the IFRSs.

included in notes 3 and 4 to the consolidated financial

statements.

Other Information

The Board of Directors are responsible for the other information. The other information comprises the Directors' report, which we obtained prior to the date of this auditor's report, and the Group Annual Report, which is expected to be made available to us after that date. The other information does not include the consolidated financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance or conclusion thereon.