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Lazurde Company for Jewelry announces the interim financial results for the period ending on 30-06-2018 (Three Months)

LAZURDE 4011 -0.66% 12.12 -0.08
Element Current quarter Similar quarter for previous year % Change current Previous quarter % Change previous
Net profit (loss) 4,845 6,424 -24.58 9,029 -46.34
Gross profit (loss) 55,984 51,629 8.44 68,459 -18.22
Operational profit (loss) 17,357 15,726 10.37 23,040 -24.67
All figures are in (Thousands) Saudi Arabia, Riyals
Element Current period Similar period for previous year % Change
Net profit (loss) 13,874 28,412 -51.17
Gross profit (loss) 124,443 125,780 -1.06
Operational profit (loss) 40,396 50,543 -20.08
Earning or loss per share, Riyals 0.32 0.66 -
All figures are in (Thousands) Saudi Arabia, Riyals
Element EXPLAINATION
Reasons of increase (decrease) for quarter compared with same quarter last year The following major factors impacted the performance of the second quarter of 2018:

1. Group operating revenues for the second quarter of 2018, amounted to SAR 92.8 million, increasing by 12.9% compared to SAR 82.2 million in the same quarter of last year. Egypt's revenues continued to recover strongly with a growth in the wholesale business by 85.7% due to a successful advertising campaign and a positive recovery in the economy and purchasing power, and in the Retail by 123.9% due to the same reasons in addition to opening new shops. In KSA, both wholesale and retail businesses have declined by 10.9% and 11.3% respectively compared to same quarter of last year due to the impact of full Saudization of the sector on some of our customers and reduction in consumer spending.

2. Gross profit of SAR 56.0 million for the second quarter of 2018 was 8.4% higher than the same quarter of last year SAR 51.6 million due to higher operating revenues, as mentioned above.

3. Operating expenses of SAR 38.6 million for the second quarter of 2018 were 7.6% higher than the operating expenses of SAR 35.9 million for same quarter of last year due to higher marketing costs, increased rental cost of retail expansion in Egypt and additional staff related costs in KSA including expat levies increase.

4. Operating income for the second quarter of 2018 amounted to SAR 17.4 million was higher by 10.4% compared to SAR 15.7 million in the same quarter of last year due to higher operating revenues.

5. Net income for the second quarter of 2018 amounted to SAR 4.8 million, a decrease of 24.5% compared to the same quarter of last year of SAR 6.4 million. The decrease was due to higher other expenses because of a one-off cost of legal, financial and commercial due diligences of a potential acquisition. Excluding this one-off charge, the net income for the second quarter is SAR 5.2 million, a decrease of 18.5% compared to the same quarter of last year.
6. Gross profit, operating income and net income represented 60.3%, 18.7% and 5.2% of operating revenues for the second quarter of 2018 compared to 62.8%, 19.1% and 7.8% for the same quarter of last year respectively.

7. For the second quarter of 2018, the Comprehensive income attributable to shareholders of the Company amounted to SAR 3.7 million, decreased by 46.0% compared to Comprehensive income of SAR 6.9 million in the corresponding quarter of last year.
Reasons of increase (decrease) for period compared with same period last year The following major factors impacted the performance of the first six months of 2018:

1. Operating revenues for the six months period ended 30 June 2018, amounted to SAR 207.8 million, increased by 1.8% compared to SAR 204.1 million in the same period of last year. Egypt's revenues continued to recover strongly with a growth in the wholesale business by 65.9% due to a successful advertising campaign and a positive recovery in the economy and purchasing power, and in the Retail by 151.2% due to the same reasons in addition to opening new shops. In KSA, wholesale and retail businesses declined by 28.9% and 3.5% respectively due to the introduction of VAT where many consumers made their purchases ahead of its implementation, in addition to the impact of full Saudization of the sector on some of our customers and reduction in consumer spending.

2. Gross profit of SAR 124.4 million for the period was 1.1% lower than the same period of last year SAR 125.8 million due to higher operating cost of revenues.

3. Operating expenses of SAR 84.0 million for the period were 11.7% higher than the operating expenses of SAR 75.2 million for same period of last year due to higher marketing costs, increased rental cost of retail expansion in Egypt and additional staff related costs in KSA including expat levies increase.

4. Operating income for the period amounted to SAR 40.4 million which was lower by 20.1% compared to SAR 50.5 million in the same period of last year due to lower operating revenues.

5. Net income for the period of 2018 amounted to SAR 13.9 million, a decrease of 51.2% compared to the same period of last year of SAR 28.4 million. The decrease was due to lower gross profit and higher expenses in the period which included one-off cost of due diligences of a potential acquisition. Excluding this one-off charge, the net income for the period is SAR 16.4 million, a decrease of 42.3% compared to the same period of last year.

6. Gross profit, operating income and net income represented 59.9%, 19.4% and 6.7% of operating revenues for the period compared to 61.6%, 24.8% and 13.9% for the same period of last year respectively.

7. For the period of 2018, the Comprehensive income attributable to shareholders of the Company amounted to SAR 16.3 million, decreased by 38.2% compared to Comprehensive income of SAR 26.4 million in the corresponding period of last year.

8. The Basic Earnings per Share (EPS) based on the profit attributable to shareholders of the Company for the period of 2018, was SAR 0.32 as against SAR 0.66 in same period of last year.

9. Total Shareholders' Equity was SAR 422.7 million compared to SAR 405.5 million as at 30 June 2017, an increase of 4.3%.
Reasons of increase (decrease) for quarter compared with previous quarter 1. Operating revenues of SAR 92.8 million for the second quarter of 2018 were lower than first quarter of 2018 by 19.3% mainly due to seasonality.

2. Net income of SAR 4.8 million for the second quarter of 2018 was lower than the net income of SAR 9.0 million by 46.3% for the first quarter of 2018 due to higher operating revenues in first quarter of 2018.

3. For the second quarter of 2018, the Comprehensive income attributable to shareholders of the Company amounted to SAR 3.7 million compared to Comprehensive income of SAR 12.6 million in the previous quarter, a decrease of 70.3%.
External auditor's report containing reservation The external auditor reviewed the financial statements and issued a conclusion examination report (unmodified) and there is no qualification or an emphasis of matter by the external auditor in their review report on the financial statements as of 30 June 2018.

Conclusion paragraph in external auditor's report as follows:

Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information is not prepared, in all material respects, in accordance with IAS 34, as endorsed in the Kingdom of Saudi Arabia.
Reclassifications in quarterly financial results There is no change in the classification of comparative figures.
Other notes Overall, the Egyptian market continued to recover strongly since the beginning of this year. In KSA, we believe that the macroeconomic changes, government diversification initiatives, employment of women, young population and increased foreign investments will stabilize and support our industry, consumer confidence and spending. We are also gaining traction in our growing retail segment where we have a higher return on investment. The company is focused on a perfect execution of the following strategic initiatives:

1. Launch new premium differentiated collections across all markets;

2. Raise prices in Egypt to cover the impact of devaluation;

3. Leverage technology and 3D printing to reduce operating expenses;

4. Open our subsidiary in Oman to strengthen GCC wholesale and increase exports;

5. Perfectly integrate the acquisition of the Tous franchise in KSA;

6. Expand our L'azurde retail business in Egypt;

7. Grow Kenaz, our value jewelry brand in Saudi Arabia through new kiosks at shopping malls, offering a wide range of top diamond jewelry designs at more affordable prices for consumers; and

8. Grow revenues at the newly exclusive retail operation of gold and diamond jewelry at key KSA airports.

Considering the above initiatives, and the underlying fundamentals supporting the jewelry industry in the long term, we believe that L'azurde remains in a strong position to deliver its longer term growth ambitions.

L'azurde announces its invitation to shareholders and prospective investors to a conference call, regarding the second quarter of 2018 Earnings Results, on August 7th at 4:00 PM, for duration of 20 minutes. The Company's management will explain the financial results for the second quarter of 2018. After the statements from 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 or send their questions by email to the address: [email protected] before or during the conference call. Management will read questions sent by email and answer them during the conference call.

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.

To access the conference call, attendees should dial-in the following toll free numbers in KSA:

KSA toll free: 800 814 3590

To access the conference call from out of KSA: UAE toll free: 8000 3570 3603, UK: +44 207 194 3759 and USA: +1 844 286 0643.

Confirmation Code: 21090318#

Audio Playback details are as follows:

Confirmation Code: 418774246# - UK: + 44 20 3364 5147 / USA: +1 646 722 4969

For more information, we would like to draw the attention of the shareholders that the Interim Consolidated Financial Statements for the period ended 30 June 2018 and earning presentation will be available on Company's website (http://www.lazurde.com) under investors' relations section.

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