Savola Group — Interim / Quarterly Report 2017

May 11, 2017

Savola Group announces the interim financial results for the period ending on 31-03-2017 (Three Months)

2050 · 11/05/2017 08:40:11 · Announcement #46968 · View on Saudi Exchange

Savola Group announces the interim financial results for the period ending on 31-03-2017 (Three Months)

Element	Current quarter	Similar quarter for previous year	% Change current	Previous quarter	% Change previous
Net profit (loss)	4.8	119.4	-	-	-
Gross profit (loss)	1,040.1	1,273.1	-	796.5	30.58
Operational profit (loss)	138.9	338.3	-	-	-
Earning or loss per share, Riyals	0.01	0.22	-	-	-
All figures are in (Millions) Saudi Arabia, Riyals

Element	EXPLAINATION
Reasons of increase (decrease) for quarter compared with same quarter last year	The decrease in the Group net income for 1st Quarter 2017 compared to same quarter last year is attributed mainly due to the following: - lower gross profit, mainly due to lower sales and lower margins in Retail sector, - higher zakat and tax, and - higher share of minority. This decrease in net income is despite: - non-recurring net positive impact for the Group of SAR 30 million from recognition of dilution gain upon deconsolidation of United Sugar Company- Egypt (USCE), considered as an associate effective March 28, 2017, after issuance of shares to EBRD and recording of option cost as announced earlier on Tadawul. - reduced losses from USCE due to lower currency exchange loss, - slightly lower operating expenses, - higher share of profit from an associate.
Reasons of increase (decrease) for quarter compared with previous quarter	The increase in the Groups profit for the 1st Quarter 2017 compared to the loss in 4th Quarter 2016 is mainly due to the following: - non-recurring items recorded in Q4 2016 comprised of impairment of assets and goodwill related to Egypt operations in Savola Foods Company of gross SAR 302 million (net impact to the Group of SAR 246 million), inventory reduction costs in Panda Retail Company of gross SAR 377 million (net impact to the Group of SAR 343 million) and impairment in the Group of non-core investments of SAR 272 million. - slightly lower operating expenses, - reduced financial charges mainly due to lower currency exchange losses, - reduced losses from USCE due to lower currency exchange loss, - non-recurring net positive impact for the Group of SAR 30 million due to recognition of dilution gain upon deconsolidation of United Sugar Company Egypt, considered as an associate effective March 28, 2017, after issuance of shares to EBRD and recording of option cost as announced earlier on Tadawul. This increase in net income is despite the following: - lower sales and lower margins in Retail sector (after excluding the non-recurring inventory reduction costs in Q4 2016), - lower share of profit from associates, - higher zakat & income tax and - higher share of minority.
Reclassifications in quarterly financial results	Items, elements and notes of the comparatives Condensed Consolidated Interim Financial Statements have been redisplayed, regrouped and reclassified to meet with the applied accounting policies for the current period which have been prepared according to the International Financial Reporting Standards (IFRS) that are endorsed in the Kingdom of Saudi Arabia. For more information, please see the note 19 (Explanation of transition to IFRSs) in the Condensed Consolidated Interim Financial Statements for the period ended in March 31, 2017 and March 31, 2016.
Other notes	The Comprehensive Income attributable to Shareholders of the Company for the first quarter reached SAR 10.8 million compared to a loss in the corresponding quarter of the last year SAR 112.4 million and as compared to a loss of SAR 1.5 billion in the previous quarter. The net revenue for the Q1, 2017 reached SAR 5.8 billion compared to SAR 6.4 billion for the same quarter last year representing a decrease of 9.4%. The equity attributable to shareholders of the parent company (without minority interest) for the first quarter reached SAR 8.2 billion compared to SAR 8.2 billion for the same quarter last year. The Savola Group's 91% owned subsidiary, Panda Retail Company has entered into an agreement, through its subsidiary, with Dubai Festival City Real Estate Development Company LLC to sell its lease rights, inventories as of April 15, 2017 and fixed assets of its Hyper Panda store (Store) in Dubai Festival City Mall, UAE in exchange for a total consideration of AED 80 million. Accordingly, inventory and fixed assets (property, plant and equipment) of this store amounting to SAR 12.3 million and SAR 10.6 million respectively are presented as (held for sale) as at March 31, 2017 in the condensed consolidated statement of financial position. The transaction will be completed in Q2 2017. The significant effects of transition to IFRS as at January 01, 2016 are as follows: - Total assets will increase by SAR 480 million; - Total liabilities will increase by SAR 456 million; - Total equity including the non- controlling interest will increase by SAR 24 million; - Equity attributable to the shareholders of Savola will decrease by SAR 329 million; and - Non-controlling interest will increase by SAR 353 million. The above changes are mainly attributable to the following: a. Consolidation of an investee, Herfy Foods Services Company, under IFRS (classified as an associate under the pre-convergence GAAP) on account of reassessment of control in view of the consolidation requirements under IFRS 10 - (Consolidated Financial Statements). This has resulted in a net increase of SAR 815 million and SAR 456 million in total assets and total liabilities respectively as of the date of transition. Accordingly, the non-controlling interest as at the date of transition has increased by SAR 370 million. b. Straight lining of rentals under operating lease arrangements resulting in the recognition of a cumulative lease expense of SAR 214 million in retained earnings with a corresponding impact on the related balances. c. Recognition of an amount of SAR 143 million as an increase in retained earnings representing unamortized balance of deferred gain on sale and lease back arrangements that is eligible for upfront recognition under IFRS. d. Other adjustments amounting to SAR 253 million and relating to end of service benefits, deferred costs, assets restoration cost, sales to distributors, investment in associates, property, plant & equipment and deferred tax liability has resulted in a decrease in Savola's retained earnings. Moreover, in respect of the application of IFRS 1, Savola has elected to apply the following allowed exemptions: a) Recycling of the foreign currency translation reserve of SAR 1.02 billion as at the date of transition to the retained earnings. The said adjustment has had no effect on the total equity balance of Savola as of that date. b) Application of Business combination accounting under IFRS 3 prospectively from the date of transition and accordingly certain previously recognized intangibles have been subsumed with the related goodwill recognized at the time of corresponding business combination transactions. We would like to inform the shareholders and investors that the condensed consolidated interim financial statements of the Group for the first quarter ended March 31, 2017 will be uploaded on Savola website after submitting it to the concerned authorities, and can be accessed through the following link: http://www.savola.com/SavolaE/Financial_Reports.php

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