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Fawaz Abdulaziz Alhokair Co. announces its Interim Financial Results for the Period Ending on 2019-09-30 ( Six Months )

Element ListCurrent QuarterSimilar quarter for previous year%ChangePrevious Quarter% Change
Sales/Revenue 1,234.61,274-3.0921,732.4-28.734
Gross Profit (Loss) 346.1249.938.495655.9-47.232
Operational Profit (Loss) 105.465.261.656349.7-69.859
Net Profit (Loss) after Zakat and Tax -26.78.9-224-
Total Comprehensive Income -27.210-221.4-
All figures are in (Millions) Saudi Arabia, Riyals
Element ListCurrent PeriodSimilar period for previous year%Change
Sales/Revenue 2,9673,119.7-4.894
Gross Profit (Loss) 1,002773.329.574
Operational Profit (Loss) 455.1379.919.794
Net Profit (Loss) after Zakat and Tax 198.2255.5-22.426
Total Comprehensive Income 2,567259.2890.354
Total Share Holders Equity (after Deducting Minority Equity) 2,5672,4375.334
Profit (Loss) per Share 0.941.22
All figures are in (Millions) Saudi Arabia, Riyals
Element ListExplanation
Increase (Decrease) in Net Profit for Current Quarter Compared to the Same Quarter of the Previous Year is Attributed to • Depreciation and Amortization Expense increased to SAR 233.5 million in Q2-FY2020, up by 222%, or SAR 161.1 million compared to Q2-FY2019. Meanwhile, Finance Costs increased to SAR 121.5 million in Q2-FY2020, up by 159% or SAR 74.5 million compared to Q2-FY2019.

• Application of IFRS 16 therefore produced a significant increase in both depreciation expense and finance costs, and a significant decrease in rent expense as compared to prior periods. The increase in finance costs is attributed to the use of the present value concept in the application of IFRS 16. A significant portion of items presented as finance costs during the current period were included in the determination of gross and operational profit during previous periods.

• Revenues decreased by 3%, the equivalent of SAR 39.4 million, compared to the same quarter of the previous year driven by:

• Implementation of a portfolio optimization strategy mandating the termination and closure of non-performing stores and disposal of weak brands.

• Gross Profit increased by 38%, the equivalent of SAR 96.2 million, compared to Q2-FY2019. This increase was driven by the implementation of IFRS 16 and the adoption of the abovementioned portfolio optimization strategy, which included the renegotiation of the cost of purchasing for a number of brands and a focus on brands and shops with higher profitability. Coupled with Alhokair’s consistent cost-control efforts, and a drive to generate operational efficiencies, these efforts delivered a 13% decline in the cost of revenues compared to the same quarter of the previous year.

• Sales and Distribution expenses fell by 41% compared to the same quarter of the previous year: The Company implemented a targeted marketing strategy relying on the use of social media, successfully reduced the cost of shipping and storage, and fostered economies with respect to back office costs.

• General and Administrative expenses declined by 42% compared to Q2-FY2019 as a result of the company’s sustainable effort to reduce this category of expenses.

Increase (Decrease) in Net Profit for Current Quarter Compared to the Previous Quarter is Attributed to Consolidated Net Profit fell by 100% to book a loss of SAR 26.7 million in Q2-FY2020 compared to a profit of SAR 224.0 million in Q1-FY2020. The movement in net profit was driven by the net impact of the following:

Revenue decreased by 28.7%, the equivalent of SAR 498 million, compared to Q1-FY2020, while gross profit fell by 47.23%, the equivalent of SAR 309.8 million during the same period: Revenue contraction was driven by the normalization of retail activity following a traditional uptick in the Holy Month of Ramadan during Q1-FY2020.

Increase (Decrease) in Net Profit for Current Period Compared to the Similar Period of the Previous Year is Attributed to Net profit decreased by 22% to SAR 198.2 million in H1-FY20 compared to SAR 255.5 million in the comparable period of the previous year primarily due to:

• Revenue: Decreased by 5% in H1-FY20, the equivalent of SAR 152.7 million, compared to the same period of the last year, driven primarily by the implementation of a portfolio optimization strategy mandating the termination and closure of non-performing stores and disposal of weak brands.

• Gross Profit: Increased by 30% in H1-FY20, the equivalent of SAR 228.7 million, driven by the implementation of IFRS 16 and the adoption of the abovementioned portfolio optimization strategy, which included the renegotiation of the cost of purchasing for a number of brands and a focus on brands and shops with higher profitability, coupled with a cost-control program delivering a 16.3% decrease in the cost of revenues compared to H1-FY19.

• Depreciation and Amortization Expense: Increased to SAR 445.6 million in H1-FY20, up by 196% or SAR 295.0 million compared to H1-FY19, a result of the replacement of rent expenses with depreciation of right-of-use assets and finance costs following the adoption of IFRS 16 accounting standards.

Finance Cost: Increased to SAR 234.1 million in H1-FY20, up by 126% or SAR 131 million compared to H1-FY19, reflecting the use of the present value concept in the application of IFRS 16.

Basis of the External Auditor's Opinion Unmodified opinion
Reclassification of Comparison Items Certain comparative figures have been reclassified to conform to the current period’s presentation.
Attached Documents  

The Capital Market Authority and the Saudi Stock Exchange take no responsibility for the contents of this disclosure, make no representations as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this disclosure, and the issuer accepts full responsibility for the accuracy of the information contained in it and confirms, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts or information the omission of which would make the disclosure misleading, incomplete or inaccurate.

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