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Emaar The Economic City announces its Interim Financial Results for the Period Ending on 2021-06-30 ( Six Months )

EMAAR EC 4220 0.79% 12.70 0.10
Element List Current Quarter Similar quarter for previous year %Change Previous Quarter % Change
Sales/Revenue 88 143 -38.461 84 4.761
Gross Profit (Loss) -20 17 - -17 17.647
Operational Profit (Loss) -150 -143 4.895 -159 -5.66
Net Profit (Loss) after Zakat and Tax -178 -205 -13.17 -194 -8.247
Total Comprehensive Income -178 -211 -15.639 -181 -1.657
All figures are in (Millions) Saudi Arabia, Riyals
Element List Current Period Similar period for previous year %Change
Sales/Revenue 172 348 -50.574
Gross Profit (Loss) -37 -22 68.181
Operational Profit (Loss) -308 -345 -10.724
Net Profit (Loss) after Zakat and Tax -372 -486 -23.456
Total Comprehensive Income -359 -509 -29.469
Total Share Holders Equity (after Deducting Minority Equity) 5,485 6,589 -16.755
Profit (Loss) per Share -0.44 -0.57
All figures are in (Millions) Saudi Arabia, Riyals
Accumulated Losses Capital Percentage %
-3,027 8,500 -35.61
All figures are in (Millions) Saudi Arabia, Riyals
Element List Explanation
The reason of the increase (decrease) in the net profit during the current quarter compared to the same quarter of the last year is Total comprehensive loss decreased by SAR 33M during the current quarter as compared to the corresponding quarter mainly due to the following:

- Decrease in general and administration and marketing cost by SAR 23M mainly due to various cost optimization measures including reduction in employee cost.

- Decrease in financial charges by SAR 13M during current quarter mainly due to decrease in overall SAIBOR rates.

- Increase in the Group’s share of results of investee, Port Development Company (PDC), by SR 7.3M mainly due to improvement in port operations as well as positive changes in revaluation of interest rate swap arrangements made by PDC.

- Decrease in gross loss of hospitality sector due to easing of COVID 19 restriction.

- The above mentioned impacts are partially offset by a gross loss of SAR -19.6M during Q2 2021 as compared to the gross profit of SAR 17M in the corresponding quarter mainly due to lower demand for KAEC real estate products.

The reason of the increase (decrease) in the net profit during the current quarter compared to the previous period of the current year is Decrease in total comprehensive loss by SAR 3 M during the current quarter as compared to the preceding quarter is mainly due to decrease in marketing expenses and impairment loss which is partially offset by increase in finance charges mainly due to certain adjustments in mark-up calculation with the financial institutions due to ongoing loan restructuring exercise by the Group.
The reason of the increase (decrease) in the net profit during the current period compared to the same period of the last year is Total comprehensive loss decreased by SAR 150M during the current period as compared to the corresponding period mainly due to the following:

- Decrease in general and administration and marketing cost by SAR 33M mainly due to various cost optimization measures including reduction in employee cost.

- Decrease in financial charges by SAR 49.6 M during current period mainly due to decrease in overall SAIBOR rates.

- Decrease in impairment loss of financial assets by SAR 21M which was partially offset by increase in impairment loss on receivable by SAR 11 M (in accordance with expected credit loss model (“ECL”) under IFRS 9).

- Increase in the Group’s share of results of investee, Port Development Company (PDC), by SR 14M mainly due to improvement in port operations as well as positive changes in revaluation of interest rate swap arrangements made by PDC amounting to SAR 35M.

- Decrease in gross loss of hospitality sector due to easing of COVID 19 restriction.

- The above mentioned impacts are partially offset by a gross loss of SAR -37M during current period as compared to the gross loss of SAR -22M for the corresponding period mainly due to lower demand for KAEC real estate products.

Statement of the type of external auditor's report Unmodified conclusion
Modification, Qualification or Emphasis of a Matter as Stated within the External Auditor Opinion We draw attention to Note 3 of the condensed consolidated interim financial statements, which indicates that the Group incurred a net loss of SR 372 million during the period ended 30 June 2021 and, as of that date, the Group’s current liabilities exceeded its current assets by SR 4,002 million. These events or conditions, along with other matters as set forth therein, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our Conclusion is not modified in respect of this matter.
Reclassification of Comparison Items Certain comparative amounts have been reclassified to conform to the current period’s presentation.
Additional Information ACCUMULATED LOSSES EXCEED 35% OF SHARE CAPITAL:

The accumulated losses, as of 30 June 2021, amounted to SR 3.027 billion, which exceed 35% of the Company’s capital amounting to SR 8.50 billion.

The main causes of these accumulated losses are as follows:

Under Saudi Organization for Certified Public Accountants (SOCPA) accounting framework, EEC had a positive retained earning balance of SR 16.8M as at 31 Dec 2015. During 2017, SOCPA made it mandatory for listed companies to adopt the International Financial Reporting Standards (IFRS) retrospectively with effect from 01 Jan 2016. Due to the switch from SOCPA accounting framework to IFRS, positive retained earnings got converted into accumulated losses of SR 1.4B as of 01 Jan 2016, mainly due to change in impairment testing methodology of operating assets and change in revenue recognition policy. However, part of the accumulated losses pertaining to revenue recognition were reversed in subsequent periods in line with the projects progress. In addition to this, during 2019, the IFRS Interpretation committee published an agenda decision “Over Time Transfer of Constructed Good - IAS 23 Borrowing Costs” which states that under construction inventories of real estate properties are not qualifying assets for capitalization of borrowing costs as these are ready for its intended sale in its current condition. Accordingly, capitalized borrowing costs pertaining to development properties (inventories), amounting to SR 252M, as of 31 December 2019, had been offloaded and charged to accumulated losses. Furthermore, the prevailing COVID 19 situation has resulted in impairment of development properties and assets pertaining to operations, amounting to SR 138M and SR 178M respectively, which had been recognized in the books of accounts as of 31 December 2020. In addition to this, financial charges pertaining to outstanding loans, losses related to financial assets being at infancy stage and depreciation, operations and maintenance of city infrastructure are other major contributors to the accumulated losses of the company as at June 30, 2021.

The company will implement the procedures and instructions issued by the Capital Market Authority for companies listed on the Saudi Stock Exchange, whose accumulated losses amounted to more than 35% of its share capital.

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