|The reason for the increase in net loss is due to: |
1- Decline in Revenue by 68.3% to SAR 164.68 million during the year 2018, compared to SAR 519.46 million in the year 2017, mainly due to no contribution in revenue from construction sector in 2018. Significant liquidity challenges leads to severe difficulties in executing the construction projects which reflected in some of the construction projects were assigned to others and some projects were cancelled/withdrawn by the clients and some other contracts are assigned a substantial proportion of the volume of work remaining for these contracts to subcontractors and slower progress on remaining construction projects. Official suspension/cancellation of number of construction projects and no new project awards in O&M sector (recurring business) in 2018 also contributed the sharp decline in revenue in 2018.
2- Gross loss has increased significantly by 18727.41% from SAR:7.24 million in 2017 to SAR:1,363.35 million in 2018. Revision in estimated cost to complete the construction projects in 2018 due to the unproductive costs incurred during the slow progress or suspension period, increase in fuel cost and employees related costs resulted many projects in loss making projects. As per the IFRS, all such losses are charged immediately to income statement. Increase in the estimated cost to complete the construction projects and cancellation/assignment of some of the construction projects to others, resulted in reversal of previously recognized revenue (unbilled revenue), as per the requirement of IFRS, all such reversals were charged to losses which resulted in significant increase in gross loss.
3- Other income has decreased by 32% (SAR 18 million) mainly due to the decrease in gain from the sale of used equipment by SAR: 13 million in 2018 as compared to the previous year. Decline in receipt of refund of work permit levy by SAR: 12.9 million in 2018 as compared to the previous year.
4- Finance charges has increased by 20.7% (SAR 15.28 million) in 2018 as compared to previous year mainly due to the increase in Sibor in 2018.
5- Additional impairment loss of SAR: 135.3 million was provided for trade receivables mainly due to the slow collection of receivables and mainly due to the old aged receivables. An additional impairment loss of SAR: 12.2 million was provided for fixed assets mainly due to the fact that the significant portion of assets were held at projects which are either cancelled, suspended or assigned to others.
The above was favorably counteracted by:
1- Decrease in selling and marketing costs by 32.7% (SAR 1.5 million), reflecting the sharp decline in bidding activities in 2018 as compared to last year and also decline in employees related costs due to cost cutting efforts started in 2014.
2- Decrease in G&A by 17.4% (SAR 5.87 million) mainly due to reduction in manpower costs. Administration cost also reduced significantly mainly due to the reduction in head office space and major portion of head office was vacated which was on rent. This is part of cost cutting efforts started in 2014.
3- Decrease in Zakat expenses by 77.8% (SAR 1.75 million).