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Abdullah A. M. Al-Khodari Sons Co. announces the annual financial results for the period ending on 31-12-2017

Element Current year Previous year % Change
Net profit (loss) -101,444,968 -119,340,685 15
Earning or loss per share, Riyals -1.82 -2.14 -
Gross profit (loss) -43,657,766 -24,956,436 -74.94
Operational profit (loss) -27,473,770 -35,245,029 22.05
All figures are in Saudi Arabia, Riyals
Element EXPLAINATION
Reasons of annual financial results The reason for the decrease in net loss is due to: 1-Decline in direct costs by 48% (SAR 522 million) mainly due to slow progress on ongoing construction projects 2-Decrease in selling and marketing costs by 31% (SAR 2.03 million) mainly due to decrease in bidding activity. 3-Decrease in G&A by 28% (SAR 13.4 million) mainly due to reduction in manpower costs and resources optimization, resulting from previously announced Leaner Al-Khodari Program. 4-Increase in other income by 25% (SAR: 11.1 million) mainly due to increase in auction sale of excess used equipment in 2017 as compared to 2016. 5-Decrease in financial charges by 8% (SAR 6.4 million. 6-Decrease in Zakat expense by 63% (SAR 3.8 million). The above was adversely counteracted by: 1-Decline in revenue by 51% (SAR 541 million) mainly due to decline in new project awards, significant liquidity challenges facing the contracting industry due to delay in payments, reflected in slow progress on ongoing construction projects 2-Sharp decline in revenue resulted in increase in Gross loss by 75% (SAR 18.7 million)
External auditor's report containing reservation Qualified Report on the Audit of Consolidated Financial Statements

Qualified Opinion
We have audited the consolidated financial statements of Abdullah Abdul Mohsin Al-Khodari Sons Company (a Saudi Joint Stock Company) (the Company) and its subsidiaries (collectively referred to as the Group) which comprise the consolidated statement of financial position as at December 31, 2017 and the consolidated statement of profit or loss and 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 a summary of significant accounting policies.

In our opinion, except for the possible effects 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 December 31, 2017 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by Saudi Organization for Certified Public Accountants (SOCPA).

Basis for qualified opinion

As of December 31, 2017, the contracts in progress were SR 1.39 billion (2016: SR 1.35 billion) and trade and other receivables were SR 592.97 million (2016: SR 631.23 million) out of which SR 1.01 billion and SR 305 million respectively are outstanding more than one year. As required by the International Financial Reporting Standards, the management has carried out an exercise to assess the impairment of the said contract assets as of December 31, 2017 but no additional impairment was booked based on the said exercise. Moreover, the assumptions and information used in the said impairment exercise were based on management own judgement and we were not provided with detailed workings substantiated with proper evidence to support these. In the absence of a detailed and proper impairment exercise, we were unable to determine whether any adjustment for credit loss provision was required to be made against these contract assets.

We conducted our audit in accordance with International Standards on Auditing (ISAs) endorsed in the Kingdom of Saudi Arabia. Our responsibilities under those standards are further described in the Auditor 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 that are relevant to our audit of the consolidated financial statements, and we have fulfilled our other ethical responsibilities in accordance with its requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Material uncertainty relating to going concern

Without further qualifying our opinion, we draw attention to Note 2.4 to the consolidated financial statements which indicates that the Group has incurred a gross loss of SR 43.7 million (2016: SR 24.9 million) and net loss of SR 101.4 million (2016: SR 119.3 million). During the year 2017, the Group revenue has been decreased significantly by 50%. As of December 31, 2017, the accumulated losses of the Group were SR 14.4 million. As stated in note 2.4, these events or conditions, in addition to the difficulties faced by the group in the collection of receivables and obtaining the necessary liquidity, along-with the other matters as set forth therein, indicate that a material uncertainty exists that may cast significant doubt on the Group ability to continue as a going concern.
Reclassifications in annual financial results The company has adopted the International Financial Reporting Standards (IFRS) effective January 1, 2017. Accordingly, some changes in the condensed consolidated financial statements have been made in a number of items in the measurement, recognition, presentation and disclosure method for the current and comparative periods in accordance with the accounting policies adopted in accordance with IFRS and other standards endorsed by the Saudi Organization for Certified Public Accountants. For further details, refer to Note 6 (First time adoption of IFRS) in the notes attached to the interim condensed consolidated financial statements for the year ended 31 December 2017.
Other notes 1-Revenue of the year 2017 is SAR. 519.46 million compared to SAR. 1,060.03 million for the year 2016 with a decrease of 51%.

2-Total comprehensive loss for the year 2017 is SAR 95.8 million as compared to SAR 121.06 million for the year 2016 with a decrease of 21%.

3-Total equity attributable to shareholders (no minority rights) as at 31 December 2017 amounted to SAR 638.7 million as compared to SAR 725.68 million as at 31 December 2016 with a decrease of 12%

4-Total non-controlling interests as at 31 December 2017 amounted to SAR 0.547 million as compared to SAR 0.556 million as at 31 December 2016 with a decrease of 1%


5-New awards for the year of 2017 were SAR 77.07 million compared to SAR 214 million during 2016. The contract backlog is SAR 2,560 million at the end of 2017 compared to SAR 2,981.06 million for the 2016
6- Accomulated losses are 14.4 Million representing 2.58% of capital.

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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