Dur Hospitality : Fourth Quarter

Dur Hospitality Company

(A Saudi Joint Stock Company)

CONSOLIDATED FINANCIAL STATEMENTS

31 December 2021

Dur Hospitality Company
(A Saudi Joint Stock Company)
CONSOLIDATED FINANCIAL STATEMENTS
31 December 2021
INDEX	PAGE
Independent auditor's report	1 -7
Consolidated statement of financial position	8 -9
Consolidated statement of income	10
Consolidated statement of comprehensive income	11
Consolidated statement of changes in equity	12
Consolidated statement of cash flows	13
Notes to the consolidated financial statements	14- 52

Ernst & Young Professional Services (Professional LLC)

C.R. No. 1010383821

Paid-up capital (SR 5,500,000 - Five million five hundred thousand Saudi Riyal) Head Office

Tel:

Al Faisaliah Office Tower, 14th Floor King Fahad Road

[phone] [phone]

Fax: [phone]

P.O. Box 2732 Riyadh 11461

Kingdom of Saudi Arabia

[e-mail]

Independent Auditor's Report

To the shareholders of Dur Hospitality Company (A Saudi Joint Stock Company)

Qualified Opinion

We have audited the consolidated financial statements of Dur Hospitality Company ("the Company") and its subsidiaries (collectively referred to as "the Group"), which comprise the consolidated statement of financial position as at 31 December 2021, and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, except for the effect of the matter described in the "Basis for Qualified Opinion" section of our report, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2021, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements that are issued by the Saudi Organization for Certified Public Accountants.

Basis for Qualified Opinion

As disclosed in note 28, to the consolidated financial statements, the Company is disputing the validity of two Interest Rate Swap derivative agreements ("the agreements") with a local financial institution. During 2020, the Company filed a lawsuit ("the Lawsuit") against the financial institution before the Committee for the Resolution of Securities Disputes ("the CRSD"). On 14 February 2022, the CRSD has issued its final decision for lack of jurisdiction of an authority and clarified that this lawsuit is subject to the Committee of Banking and Financial Disputes and Violations. On 10 March 2022, The Company filed a new lawsuit before the Committee of Banking and Financial Disputes and Violations to revoke the agreements. The new lawsuit is still at preliminary stage at the Committee of Banking and Financial Disputes and Violations and the potential outcome cannot be reasonably estimated at this stage. Had these agreements been accounted for in the consolidated financial statements, the net income for the year would be higher by SR 16.4 million (2020: net income would be lower by SR 47.9 million), the net equity as of 31 December 2021 would be lower by SR 66.7 million (2020: SR 83.1 million) and the net equity as of 1 January 2020 would be lower by SR 35.2 million. Our opinion on the prior year audit report has been qualified on the same matter.

We conducted our audit in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia. 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 professional code of conduct and ethics that are endorsed in the Kingdom of Saudi Arabia are relevant to our audit of the consolidated financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

To the shareholders of Dur Hospitality Company (A Saudi Joint Stock Company) (continued)

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming auditor's opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the "Basis for Qualified Opinion" section of our report and for each of the matters below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

To the shareholders of Dur Hospitality Company (A Saudi Joint Stock Company) (continued)

Key Audit Matters (continued)

How our audit addressed the key audit matter	Key audit matter
Impairment assessment of property and equipment
Audit procedures that we performed included the following:  Assessed the appropriateness of the management's procedures to ensure whether an indication of impairment exists or not.  Evaluating the Group's assumptions and estimates to determine the recoverable value of its assets, including those relating to occupancy rates, average room rates, operating expense and discount rates.  Reviewed the statement of operating income for CGU associated with property and equipment during the year.  Reviewed the internal reports (including the Board of Directors minutes of meetings) to assess any future plans in relation to property and equipment.  Assessed the adequacy of the Group's disclosures relating to impairment of non-financial assets in the consolidated financial statements.	At 31 December 2021, total property and equipment of the Group amounted to SR 2,711 million, representing 79.6% of total assets. The carrying values of these property and equipment are reviewed by the management for potential indicators of impairment and for those assets where such indicators exist, management determine the recoverable value. We considered this as a key audit matter, since it require a significant management judgment in reviewing the existence of the impairment indicators. Also, the potential impairment, if any, may have significant impact on the consolidated statement of financial position and consolidated result of operations of the Group. Refer to note (2-5) to the consolidated financial statements for the accounting policy of impairment of non-financial assets and note (13) for the disclosure of property and equipment.