‎“Saudi Cables” losses fell 25% in Q3 to SR35 mln

The financial statements of the Saudi Cable Company revealed that the company’s losses decreased by 24.98% at the end of the third quarter of this year, to reach 34.928 million riyals, compared to losses of about 46.559 million for the same period last year.

The company said in a statement to the Saudi market, “Tadawul”, today, Thursday, that the decline in losses during the comparison periods is due to the lack of production, the decrease in expenses, the increase in the share of the sister company’s profits, and the decrease in other revenues during the comparison periods.

The company achieved losses of 116.572 million riyals at the end of the first nine months of this year, compared to losses of 101.627 million riyals in the same period of the previous year, an increase in losses by 14.71%.

“The Group made a net loss of SR 34.9 million in current quarter as compared to the net loss of SR 46.6 million in the same quarter of the previous year and the change in net losses of the current quarter compared with net loss of the same quarter of the previous year are mainly due to following impacts:

• Lower volumes in current quarter as compared to same quarter of previous year.
• Decreased expenses in current quarter as compared to same quarter of the previous year.
• Increased share of profit from associate in current quarter as compared to share of losses in same quarter of the previous year.
• Decreased other income in current quarter as compared to same quarter of the previous year.”

“The Group made a net loss of SR 34.9 million in current quarter as compared to the net loss of SR 44.5 million in the previous quarter and the change in net losses of the current quarter compared with net loss of the previous quarter are mainly due to following impacts:

• Lower volumes in current quarter as compared to the previous quarter.
• Decreased expenses in current quarter as compared to the previous quarter.
• Increased share of profit from associates in current quarter as compared to share of losses in the previous quarter.
• Increased other income in current quarter as compared to the previous quarter.+”

“The Group made a net loss of SR 116.6 million in current period as compared to the net loss of SR 101.6 million in the same period of the previous year and the change in net losses of the current period compared with net loss of the same period of the previous year are mainly due to following impacts:

• Lower volumes in current period as compared to same period of previous year.
• Decreased expenses in current period as compared to same period of the previous year.
• Increased share of profit from associates in current period as compared to share of profit in same period of the previous year.
• Decreased other income in current period as compared to same period of the previous year.”

Modification, Qualification or Emphasis of a Matter as Stated within the External Auditor Opinion:

Scope of Review

Except as explained in the following paragraphs, we conducted our review in accordance with International Standard on Review Engagements 2410, “Review of interim financial information performed by the independent auditor of the entity”, as endorsed in the Kingdom of Saudi Arabia. A review of interim condensed consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia, and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Qualified Conclusion

• As stated in note 17, the Group received assessments from the Zakat, Tax and Customs Authority (ZATCA), claiming additional Zakat liabilities of SAR 234.6 million in respect of the assessment for prior years against which the Group has filed appeals. It is management’s assertion that they have grounds to contest against items included in the assessments raised by ZATCA, that the outcome of the appeals is uncertain at this stage and, therefore, it is not possible to determine the potential Zakat liability. No provision has been made in these interim condensed consolidated financial statements for the items under appeal and for any potential exposure relating to open years not yet assessed by ZATCA. We have not been provided details or basis of certain appeals the assessments, including details of zakat computation and appeals in respect of certain open years for the Company and of certain subsidiaries. We were, therefore, unable to determine whether any adjustments are necessary to the Group’s current or prior years’ / periods’ zakat charges.
• The Group has property, plant and equipment amounted of SAR 258.44 million as at September 30, 2022 and there are some indicators (i.e. reduction in revenue, gross losses, negative operating cash flows etc.) that the recoverable value of them is less than its book value, we were unable to obtain sufficient evidence regarding the recoverable amount of them as the Group’s management hasn’t provided us with sufficient data related to the recoverable amount of the property, plant and equipment and the extent to recognize any impairment losses the book value of property, plant and equipment as at September 30, 2022.

Basis for Qualified Conclusion (continued)

• As stated in note 6, the interim condensed consolidated financial statements include investment in an associate (50% ownership) with a carrying value of SAR 267.3 million and share of results of SAR 7.9 million as at and for the nine-month period ended September 30, 2022. The associate had trade receivables amounting to SAR 54.4 million, out of which the Group’s share is SAR 27.2 million; that are overdue for more than one year, against which management has not recognized any allowance for expected credit losses. Management was unable to provide us with appropriate support to ensure the possibility of recoverability of those trade receivables balances. Consequently, we were unable to determine whether any adjustments to the Group’s share of results of an associate and the carrying value of the investment in an associate were necessary as of and for the nine-month period ended September 30, 2022.

Qualified Conclusion

Based on our review, except for the possible effects of the matters described in the Basis for Qualified Conclusion paragraphs, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements is not prepared, in all material respects, in accordance with IAS 34 as endorsed in the Kingdom of Saudi Arabia.

Material Uncertainty Related to Going Concern

We draw attention to note 2 of the interim condensed consolidated financial statements, which indicates that the Group has incurred a net loss of SAR 117.5 million for the nine-month period ended September 30, 2022 (SAR 100.9 million for the nine-month period ended September 30, 2021), and as of that date, the Group’s accumulated losses have reached SAR 79.4 million (as at December 31, 2021: SAR 256.7 million), representing 119.01% of the share capital as at September 30, 2022 (as at December 31, 2021: 71.19%). Further, the Group current liabilities exceeded its current assets by SAR 549.6 million as at September 30, 2022 (as at December 31, 2021: SAR 476.4 million). These events or conditions, along with other matters, indicate a significant doubt about Group’s ability to continue as a going concern and its ability to meet its obligations when it becomes due. Our conclusion is not modified in respect of this matter.

Other Matter

The consolidated financial statements for the year ended December 31, 2021 and the interim condensed consolidated financial statements for the three-month period ended March 31, 2022 were audited and reviewed by another auditor who expressed a modified audit opinion and review conclusion on May 15, 2022 and May 23, 2022 respectively.

Additional Information:

“The loss per share during this period amounts to SR 5.01 against loss per share of SR 2.82 for the same period of last year.

Loss per share for the current period was calculated based on the average of 23,268 thousand shares compared to 36,061 thousand shares for the same period of previous year.

In line with IAS 33 Earnings per share, Basic EPS is calculated by dividing profit or loss attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the period. As there were two capital reduction that took place during the period, as approved in the Extraordinary General Assembly by the shareholders, on February 20, 2022 and July 25, 2022, The weighted average structure changed since then, affecting weighted average number of ordinary shares of nine-month period ended September 30, 2022.

Subsequent events

On October 19, 2022, the Board of Directors (BOD) recommended through resolution number 2022/48 to decrease the Parent Company share capital from SAR 66,729,060 (6,672,906 shares) to SAR 7,000,000 (700,000 shares) for the purpose of restructuring the share capital and to absorb losses of SAR 59,729,060 (5,972,906 shares). BOD also recommended to increase the share capital (subsequent to the reduction) from SAR 7,000,000 (700,000 shares) to SAR 287,000,000 (28,700,000 shares) to enhance the Company’s working capital and operation capacity. The Company has not yet appointed an advisor for both transactions and seek relevant regulatory and shareholder approvals to take effect.