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L’azurde Company for Jewelry Announces Its Condensed Consolidated Interim Financial Results for the Period Ended 30th June 2020 (Six Months)

Element ListCurrent QuarterSimilar quarter for previous year%ChangePrevious Quarter% Change
Sales/Revenue 170.9533.8-67.984633.7-73.031
Gross Profit (Loss) 21.180.8-73.88670.6-70.113
Operational Profit (Loss) -50.828-12.4-
Net Profit (Loss) after Zakat and Tax -66.212.2--1.64,037.5
Total Comprehensive Income -70.315.6--0.235,049.999
All figures are in (Millions) Saudi Arabia, Riyals
Element ListCurrent PeriodSimilar period for previous year%Change
Sales/Revenue 804.61,207.3-33.355
Gross Profit (Loss) 91.7176.8-48.133
Operational Profit (Loss) -38.458.4-
Net Profit (Loss) after Zakat and Tax -67.824.1-
Total Comprehensive Income -70.530.3-
Total Share Holders Equity (after Deducting Minority Equity) 347.7456.3-23.8
Profit (Loss) per Share -1.580.56
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 The following factors mainly explain the changes in the Income Statement and performance of the second quarter of 2020:

1. Group total revenues, including gold metal value, were SAR 170.9 million in the second quarter of 2020, a decrease of 68.0% compared to SAR 533.8 million in the same quarter of last year. It is worth noting that the Group does not consider gold metal value as real revenue as the Group does not make profits or losses from sales of gold as a metal.

2. Group operating revenues for the second quarter of 2020 amounted to SAR 49.0 million, have decreased by 63.1% compared to SAR 132.8 million in the same quarter of last year.

In KSA, wholesale revenues were 72.7% lower than same quarter of last year, negatively impacted by complete closure of gold souks and malls since mid-March 2020 to end of April and then reduced working hours in May and June due to COVID-19. Also, due to the effect of unusual and unprecedented factors such as COVID-19 and sharp increase in gold price, wholesale revenues were significantly reduced.

Wholesale revenues in Egypt declined by 59.2% compared to same quarter of last year due to reduced working hours enforced in Egypt’s malls and souks.

In KSA, retail revenues decreased by 68.1% mainly due to complete closure of malls since mid-March 2020 to end of April and then reduced working hours in May and June due to COVID-19.

In Egypt, retail revenues decreased by 23.0% mainly due to reduction in working hours after precautionary actions were taken due to COVID-19.

3. Group gross profit of SAR 21.1 million for the second quarter of 2020 was lower by 73.9% compared to SAR 80.8 million in the same quarter of last year mainly due to lower operating revenues.

4. Operating loss was SAR 50.8 million for the second quarter of 2020 compared to a profit of SAR 28.0 million in same quarter of last year despite reduction in operating expenses by 29.4% in the second quarter of 2020, due to the effect of unusual and unprecedented factors such as COVID-19 and sharp increase in gold price. Also due to the tripling of VAT to 15% from 1 July 2020, the Company took the decision to accept one-off cost of SAR 34.7 million related to the recall of some of its heavy weight products not meeting the latest consumers trends. The purpose of this decision was to rationalize and optimize Company’s investment in gold working capital in order to reduce finance costs.

5. Net loss for the second quarter of 2020 amounted to SAR 66.2 million compared to net profit of SAR 12.2 million in the same quarter of last year due to lower operating revenues and one off cost related to recall of some products, as explained above.

6. For the second quarter ended 30 June 2020, the Comprehensive Loss attributable to shareholders of the Company amounted to SAR 70.3 million compared to Comprehensive Income of SAR 15.6 million in the same quarter of last year.

Increase (Decrease) in Net Profit for Current Quarter Compared to the Previous Quarter is Attributed to 1. Group total revenues, including gold metal value, were SAR 170.9 million in the second quarter of 2020, a decrease of 73.0% compared to SAR 633.7 million in the first quarter of 2020.

2. Operating revenues of SAR 49.0 million in the second quarter of 2020 were lower by 57.2% than operating revenues in first quarter of 2020 of SAR 114.3 million, due to impact of COVID-19 outbreak and other reasons, as explained above.

3. Net loss of SAR 66.2 million for the second quarter of 2020 was higher than the net loss of SAR 1.6 million in first quarter of 2020 due to impact of COVID-19 outbreak and other reasons, as explained above.

4. For the second quarter of 2020, the Comprehensive loss attributable to shareholders of the Company amounted to SAR 70.3 million, compared to Comprehensive loss of SAR 0.2 million in the previous quarter.

Increase (Decrease) in Net Profit for Current Period Compared to the Similar Period of the Previous Year is Attributed to The following factors mainly explain the changes in net income and performance of the first six months of 2020:

1. Group total revenues, including gold metal value, were SAR 804.6 million in the first six months of 2020, a decrease of 33.4% compared to SAR 1,207.3 million in the same period of last year.

2. Group operating revenues for the first six months of 2020 of SAR 163.3 million have decreased by 42.9% compared to SAR 285.8 million in the same period of last year.

In KSA, wholesale revenues were 57.3% lower than same period of last year, negatively impacted by complete closure of gold souks and malls since mid-March to end of April and then reduced working hours in May and June due to COVID-19. Also, due to the effect of unusual and unprecedented factors such as COVID-19 and sharp increase in gold price, wholesale revenues were significantly reduced.

Wholesale revenues in Egypt declined by 30.6% compared to same period of last year due to reduced working hours enforced in Egypt’s malls and souks.

In KSA, retail revenues decreased by 50.4% due to complete closure of malls since mid-March 2020 to end of April and then reduced working hours in May and June due to COVID-19.

In Egypt, retail revenues decreased by 4.7% mainly due to reduction in working hours after precautionary actions were taken due to COVID-19.

3. Group gross profit of SAR 91.7 million for the first six months of 2020 was 48.1% lower than the same period of last year of SAR 176.8 million mainly due to lower operating revenues.

4. Operating loss was SAR 38.4 million in the first six months of 2020 compared to operating profit of SAR 58.4 million in same period of last year due to lower operating revenues despite reduction in operating expenses by 19.4% in the first six months of 2020, due to the effect of unusual and unprecedented factors such as COVID-19 and sharp increase in gold price. Also due to the tripling of VAT to 15% from 1 July 2020, the Company took the decision to accept one-off cost of SAR 34.7 million related to the recall of some of its heavy weight products not meeting the latest consumers trends. The purpose of this decision was to rationalize and optimize Company’s investment in gold working capital in order to reduce finance costs.

5. Net loss for the first six months of 2020 amounted to SAR 67.8 million compared to net profit of SAR 24.1 million in the same period of last year due to lower operating revenues mainly due to COVID-19 due to impact of COVID-19 outbreak and other reasons, as explained above.

6. For the first six months of 2020, the Comprehensive loss attributable to shareholders of the Company amounted to SAR 70.5 million compared to Comprehensive income of SAR 30.3 million in the same period of last year.

7. Basic Earnings per Share (“EPS”) based on profit attributable to shareholders of the Company for the second quarter of 2020 was SAR -1.58 compared to SAR 0.56 in the same period of last year.

8. Total Shareholders’ Equity was SAR 347.7 million for the period ended 30 June 2020 compared to SAR 456.3 million in the same period of last year, a decrease of 23.8%.

Basis of the External Auditor's Opinion Unmodified opinion
Modification, Qualification or Emphasis of a Matter as Stated within the External Auditor Opinion Not applicable.
Reclassification of Comparison Items For better presentation, certain of the prior period figures have been reclassified to conform with the presentation in the current period.
Additional Information General Comments:

L’azurde has successfully navigated through many challenges over its 40-year history. The COVID-19 crisis which has hit most businesses around the world, in addition to the fast gold price increase and the VAT tripling, generated the most challenging situation we faced. Indeed, our core traditional wholesale business by weight caused significant short term stress on the business as it is majorly impacted by the Gold price increase and the higher VAT, which came at the same time as COVID-19. We are optimistic about the future because we proactively started the Company transformation since a year by introducing new businesses where we sell jewelry by piece in the Modern trade (Malls) and online. The traditional wholesale business selling jewelry by weight represents a lower share in Group’s total revenues in Q2 2020 compared to Q2 2019 and we expect that share of jewelry sold by piece will continue to grow rapidly. L’azurde has a very solid brand name, strong heritage, jewelry industry knowledge, experienced management team and very committed shareholders to successfully transform the Company. The key drivers for the future success of the Company consist of:

1. Developing the fast growing Miss L’ fashion jewelry line to its full potential through our own retail points of sales, E-Commerce (which recently reached a very promising contribution) and 3rd party retailers in Modern trade.

2. Expanding our successful L’azurde retail business in Egypt through new points of sales and a stronger assortment.

3. Optimizing the traditional wholesale business selling jewelry by weight through working capital reduction and costs efficiencies.

4. Scaling our promising fast growing E-Commerce business through more investments in technology, infrastructure, systems and a state of the art experienced digital organization.

5. Expanding the TOUS global franchise business in KSA through e-commerce and more investments in marketing and products assortment. We plan to grow our KSA users’ base and turn TOUS into a strong household brand name in KSA, similarly to what we did with L’azurde.

6. Leveraging our solid customers’ network in the traditional Gold jewelry market to launch a L’azurde jewelry line sold by piece. As the market leader L’azurde will help reshape and transform the traditional Gold jewelry segment by offering a new jewelry line meeting the consumers’ latest trends and offering retailers a very attractive commercial offer.

7. Maintaining our strong cash position and great banking relationships to support the Company transformation.

L'azurde announces its invitation to investors and financial analysts to a conference call, regarding the second quarter of 2020 Earnings Results, on August 31, 2020 4:00 PM, for duration of 20 minutes. The Company’s management will explain the financial results for the second quarter of 2020. After the presentation of the Company’s management, there will also be a questions and answers session.

To ask questions, attendees can join live questions and answers session at the end of the conference.

The Company advises interested attendees to dial-in for registration starting from 3:50pm to ensure that they are logged in at 4.00pm when the conference will start. The registration process for attendees will take a few minutes.

Investors interested to join the Earnings Call can obtain the dial-in details by contacting L’azurde Investor Relations at investors@lazurde.com

For more information, we would like to draw the attention of the shareholders that the Consolidated Financial Statements and Earning Presentation for the period ended 30 June 2020 will be available on Company’s website (http://www.lazurde.com) under investors’ relations section.

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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