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L’azurde Company for Jewelry Announces Its Annual Consolidated Financial Results for the Year Ended 31st December 2020

LAZURDE 4011 39.44% 16.90 4.78
Element List Current Year Previous Year %Change
Sales/Revenue 1,278.4 1,976.4 -35.316
Gross Profit (Loss) 183 287.8 -36.414
Operational Profit (Loss) -58.6 46.7 -
Net Profit (Loss) after Zakat and Tax -120.5 -17.5 588.571
Total Comprehensive Income -118.6 -5.9 1,910.169
Total Share Holders Equity (after Deducting Minority Equity) 297.3 418.2 -28.909
Profit (Loss) per Share -2.8 -0.41
All figures are in (Millions) Saudi Arabia, Riyals
Element List Explanation
The reason of the increase (decrease) in the net profit during the current year compared to the last year is The following factors mainly explain the changes in the Income Statement and performance of 2020:

1. Group total revenues, including gold metal value, were SAR 1,278.4 million in 2020, a decrease of 35.3% compared to SAR 1,976.4 million in 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 of SAR 347.4 million for 2020 have decreased by 27.8% compared to SAR 481.2 million in last year.

In KSA, wholesale revenues were 45.2% lower than 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 tripling of VAT to 15% from 1 July 2020 and sharp increase in gold price.

Wholesale revenues in Egypt declined by 24.0% compared to last year due to reduced working hours enforced in Egypt’s malls and souks in first half of the year due to COVID-19 and the sharp increase in gold price.

In KSA, retail revenues decreased by 37.5% 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. Also tripling of VAT to 15% has impacted Diamonds jewelry revenues in the current period, partially offset by promising results of the new affordable fashion jewelry Miss L’ brand.

In Egypt, retail revenues increased by 24.4% organically and by opening of five new locations in 2020 selling Miss L’ and diamond jewelry, overcoming the impact of reduction in working hours after precautionary actions were taken due to COVID-19.

3. Group gross profit of SAR 183.0 million for the year 2020 was 36.4% lower than last year of SAR 287.8 million mainly due to lower operating revenues.

4. Operating loss was SAR 58.6 million in 2020 compared to operating profit of SAR 46.7 million in last year due to lower operating revenues despite reduction in operating expenses by 11.8% in 2020, due to the effect of unusual and unprecedented factors such as COVID-19, the tripling of VAT and sharp increase in gold price. Also due to the Company’s decision to accept a 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 and price levels. 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 year 2020 amounted to SAR 120.5 million compared to net loss of SAR 17.5 million in last year due to lower operating revenues mainly due to impact of COVID-19 outbreak and other reasons, as explained above.

6. For 2020, the Comprehensive loss attributable to shareholders of the Company amounted to SAR 118.6 million compared to Comprehensive loss of SAR 5.9 million in last year.

7. Despite the net loss, the Group has managed to generate a significant positive cash inflow from operations of SAR 58.7 million in 2020. This was achieved by reducing working capital, increasing collection from wholesale customers and higher sales in the retail channel.

8. The Group reduced the Gold working capital by 36% from 6.6 Tons in December 2019 to 4.2 tons in December 2020.

9. Group launched the new fast growing e-commerce business in April 2020, which has already delivered SAR 6.6 million revenues in 2020.

10. Basic (Loss) / Earnings per Share based on net (loss) / profit attributable to shareholders of the Company for the period ended 31 December 2020 was SAR -2.8 compared to SAR -0.41 in last year.

11. Total Shareholders’ Equity was SAR 297.3 million for the period ended 31 December 2020 compared to SAR 418.2 million in last year, a decrease of 28.9%.

Statement of the type of external auditor's report 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 year figures have been reclassified to conform with the presentation in the current year.
Additional Information 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 sharp gold price increase and the VAT tripling, generated a highly challenging situation. Indeed, our core traditional wholesale business by weight was significantly stressed 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), online and recently in the Gold Souks. The traditional wholesale business selling jewelry by weight represents a lower share of revenues in 2020 compared to 2019 and we expect that share of jewelry sold by piece to continue growing rapidly, which will enhance our gross margin and reduce our working capital. L’azurde has a very solid brand name, strong heritage, jewelry industry knowledge, experienced management team and a very committed Board of Directors 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 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. Rebuild the volume and optimize the traditional wholesale business selling jewelry by weight through working capital reduction and costs efficiencies.

4. Leveraging our solid customers’ network in the traditional Gold jewelry market to fully develop the recently launched L’azurde Instyle 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 very attractive commercial terms.

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

6. 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, similar to what we did with L’azurde.

7. Maintaining our strong cash position and durable banking relationships to support the Company’s transformation.

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 31 December 2020 will be available on Company’s website (http://www.lazurde.com) under investors’ relations section.

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