Independent Auditor’s Report to the Shareholders of Gulf Navigation Holding PJSC

Grant Thornton Audit and Accounting Limited (Dubai Branch)

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Report on the Audit of the Consolidated Financial Statements

Opinion

We have audited the consolidated financial statements of Gulf Navigation Holding PJSC (the “Company”) and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated statement of financial position as at December 31, 2023, and the consolidated statement of profit or loss, consolidated statement of other 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 material accounting policy information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2023, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS).

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 International Code of Ethics for Professional Accountants (including International Independence Standards) (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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 for the year ended December 31, 2023. These matters were addressed 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.

Key audit matter	How our audit addressed the key audit matter
Impairment of goodwill The Group’s consolidated statement of financial position includes AED 143,463 thousand of goodwill, representing 14% of total Group assets. In accordance with IFRS, this balance is allocated to Cash Generating Units (CGUs) which are tested annually for impairment, or whenever changes in circumstances or events indicate that the carrying amount of such intangible assets may not be recoverable. This is a key audit matter as determining whether the carrying value of goodwill is recoverable requires management to make significant estimates concerning the expected future cash flows and associated discount rates and growth rates based on management’s view of future business prospects.	We performed the following: Checked the mathematical accuracy of the impairment model used for impairment testing, and the extraction of inputs from source documents; Reviewed the reasonableness of the key assumptions used in the impairment model, including specifically the operating cash flow projections, discount rates, and terminal growth rates; Engaged our internal specialists to assist us in reviewing the methodologies applied including estimates and judgments made by management; Considered the sensitivity of the impairment testing model to changes in key assumptions; and Assessed the adequacy of the related disclosures in the consolidated financial statements.
Impairment of vessels As disclosed in Note 6 to the consolidated financial statements, the Group’s consolidated statement of financial position includes AED 516,101 thousand of vessels, representing 52% of total Group assets. In accordance with IFRS, at the end of each reporting period, it is required to assess whether there is any indication that an asset may be impaired, and, if so, the asset’s recoverable amount must be determined. This is a key audit matter because the Group has generated negative cash flows from its operating activities during the year ended December 31, 2023 and determining whether the carrying value of a vessel is recoverable requires management to make significant estimates concerning the expected future cash flows and associated discount rates and growth rates based on management’s view of future business prospects.	We performed the following: Checked the mathematical accuracy of the impairment model used for impairment testing, and the extraction of inputs from source documents; Reviewed the reasonableness of the key assumptions used in the impairment model, including the operating cash flow projections, discount rates, and terminal growth rates; Engaged our internal specialists to assist us in reviewing the methodologies applied including estimates and judgments made by management; Considered the sensitivity of the impairment testing model to changes in key assumptions; and Assessed the adequacy of the related disclosures in the consolidated financial statements.

Key audit matter

How our audit addressed the key audit matter

Impairment of goodwill

The Group’s consolidated statement of financial position includes AED 143,463 thousand of goodwill, representing 14% of total Group assets. In accordance with IFRS, this balance is allocated to Cash Generating Units (CGUs) which are tested annually for impairment, or whenever changes in circumstances or events indicate that the carrying amount of such intangible assets may not be recoverable.

This is a key audit matter as determining whether the carrying value of goodwill is recoverable requires management to make significant estimates concerning the expected future cash flows and associated discount rates and growth rates based on management’s view of future business prospects.

We performed the following:

Checked the mathematical accuracy of the impairment model used for impairment testing, and the extraction of inputs from source documents;
Reviewed the reasonableness of the key assumptions used in the impairment model, including specifically the operating cash flow projections, discount rates, and terminal growth rates;
Engaged our internal specialists to assist us in reviewing the methodologies applied including estimates and judgments made by management;
Considered the sensitivity of the impairment testing model to changes in key assumptions; and
Assessed the adequacy of the related disclosures in the consolidated financial statements.

Impairment of vessels

As disclosed in Note 6 to the consolidated financial statements, the Group’s consolidated statement of financial position includes AED 516,101 thousand of vessels, representing 52% of total Group assets. In accordance with IFRS, at the end of each reporting period, it is required to assess whether there is any indication that an asset may be impaired, and, if so, the asset’s recoverable amount must be determined.

This is a key audit matter because the Group has generated negative cash flows from its operating activities during the year ended December 31, 2023 and determining whether the carrying value of a vessel is recoverable requires management to make significant estimates concerning the expected future cash flows and associated discount rates and growth rates based on management’s view of future business prospects.

We performed the following:

Checked the mathematical accuracy of the impairment model used for impairment testing, and the extraction of inputs from source documents;
Reviewed the reasonableness of the key assumptions used in the impairment model, including the operating cash flow projections, discount rates, and terminal growth rates;
Engaged our internal specialists to assist us in reviewing the methodologies applied including estimates and judgments made by management;
Considered the sensitivity of the impairment testing model to changes in key assumptions; and
Assessed the adequacy of the related disclosures in the consolidated financial statements.

Comparative Information

Without qualifying our opinion, we draw attention to Note 31 to the consolidated financial statements, which indicates that the comparative information presented as at December 31, 2022 has been restated.

As part of our audit of these consolidated financial statements, we audited the adjustments described in Note 31 that were applied to restate the comparative information presented as at December 31, 2022.

The consolidated financial statements of the Group as at and for the year ended December 31, 2022, excluding the adjustment described in Note 31 to the consolidated financial statements, were audited by another auditor who expressed a modified opinion on those statements on April 3, 2023 with respect to gains from treasury shares recognized in profit or loss.

Other Matter

At the General Assembly Meeting of the Company that was held on April 30, 2023, the shareholders approved the consolidated financial statement of the Group as at and for the year ended December 31, 2022 but did not approve the auditor’s report and did not discharge the auditor for the fiscal year ended December 31, 2022.

Other Information

The Board of Directors is responsible for the other information. The other information comprises the information included in the Board of Directors’ Report but does not include the consolidated financial statements and our auditor’s report thereon. We have obtained the Board of Directors’ Report prior to the date of our auditor’s report.

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

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we have obtained prior to the date of auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS and their preparation in compliance with the applicable provisions of the UAE Federal Law No. (32) of 2021 and the Company’s Articles of Association, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

Further, as required by the UAE Federal Law No. (32) of 2021, we report that:

We have obtained all the information we considered necessary for the purposes of our audit;
The consolidated financial statements have been prepared and comply, in all material respects, with the applicable provisions of the UAE Federal Law No. (32) of 2021;
The Company has maintained proper books of account in accordance with established accounting principles;
The financial information included in the Board of Directors’ Report is consistent with the books of account of the Company;
The Group’s investments in shares and stocks during the year ended December 31, 2023 are disclosed in Note 11 to the consolidated financial statements;
Notes 21 to the consolidated financial statements discloses material related party transactions and the terms under which they were conducted;
Based on the information that has been made available to us, nothing has come to our attention which causes us to believe that the Company has contravened during the financial year ended December 31, 2023, any of the applicable provisions of the UAE Federal Law No. 32 of 2021 or of its Articles of Association, which would materially affect its activities or its financial position as at December 31, 2023; and
There were no social contributions made during the financial year ended December 31, 2023.

Grant Thornton UAE
Dr. Osama El Bakry
Registration No. 935
Dubai, United Arab Emirates
March 30, 2024