The following factors mainly explain how the net profit of the second quarter of 2023 was achieved:

1. Group total revenues, including gold metal value, were SAR 477.8 million in the second quarter of 2023, an increase of 12.7% compared to SAR 424.0 million in the same quarter of last year. It is worth noting that the Group does not make profits or losses from the value of the sold gold as a metal.

2. Group operating revenues, which better represent revenues of the Group after excluding gold metal value, amounted to SAR 115.3 million in the second quarter of 2023, a decrease of 1.5% compared to SAR 117.1 million in the same quarter of last year due to the translation of revenues of Egypt at a lower exchange rate.

In KSA, wholesale operating revenues were 8.1% lower than the last year while retail operating revenues grew by 10.3% mainly due to growth in like-for-like stores and due to the opening of new shops as part of the Group’s plan to expand its retail network in KSA.

In Egypt, wholesale operating revenues increased by 62% in Egyptian Pound (EGP) terms but declined by 1.5% after translation to SAR due to the devaluation of EGP, compared to the same quarter of last year. The company continues to increase its sales prices in Egypt gradually to cope with the EGP devaluation.

In Egypt, retail operating revenues grew by 46.0% in EGP terms due to increasing sales prices to cope with the devaluation, however, declined by 12.0% compared to same quarter of last year after translation to SAR due to the devaluation of EGP. The company will continue to increase prices to fully compensate for the devaluation impact.

3. Group gross profit of SAR 70.8 million in the second quarter of 2023 was 3.9% lower than the same quarter of last year of SAR 73.7 million due to lower operating revenues because of the devaluation in EGP, which is expected to be compensated with continuing increasing prices in EGP.

4. Group operating expenses of SAR 52.1 million were 11.4% lower than the same quarter of last year of SAR 58.8 million due to cost control initiatives and EGP devaluation.

5. Group operating profit of SAR 18.7 million for the second quarter of 2023 was 25.5% higher compared to SAR 14.9 million in the same quarter of last year due to lower operating expenses.

6. Net profit in the second quarter of 2023 amounted to SAR 7.2 million compared to SAR 8.5 million in the same quarter of last year, a small decrease of SAR 1.3m (15.3%), mainly due to higher finance charges, zakat and income tax.

7. For the second quarter ended 30 June 2023, the Comprehensive income attributable to shareholders of the Company amounted to SAR 7.0 million compared to Comprehensive income of SAR 3.5 million in the same quarter of last year.

2. Operating revenues of SAR 115.3 million for the second quarter of 2023 were lower than first quarter of 2023 by 8.7% of SAR 126.1 million due to seasonality.

3. Net profit of SAR 7.2 million for the second quarter of 2023 compared to SAR 11.6 million for the first quarter of 2023 mainly due to seasonality.

1. Group total revenues, including gold metal value, were SAR 974.2 million in the current period of 2023, a decrease of 6.2% compared to SAR 1,038.6 million in the same period of last year. It is worth noting that the Group does not make profits or losses from the value of the sold gold as a metal.

2. Group operating revenues, which better represent revenues of the Group after excluding gold metal value, amounted to SAR 241.4 million in the current period of 2023, a decrease of 10.2% compared to SAR 268.8 million in the same period of last year due to the translation of revenues of Egypt at a lower exchange rate.

In KSA, wholesale operating revenues were 6.3% higher than last year due to strong sales of L’azurde gold in traditional gold souks.

In KSA, Retail operating revenues were 5.5% higher than last year due to growth in like-for-like stores and opening of new shops.

In Egypt, wholesale operating revenues increased by 27% in Egyptian Pound (EGP) terms but declined by 28.3% after translation to SAR due to the devaluation of EGP, compared to the same period of last year. The company continues to increase its sales prices in Egypt gradually to cope with the EGP devaluation.

In Egypt, retail operating revenues grew by 47% in EGP terms due to increasing sales prices to cope with the devaluation, however, declined by 16.0% compared to last year after translation to SAR due to the devaluation of EGP. The company will continue to increase prices to fully compensate for the devaluation impact.

3. Group gross profit of SAR 149.9 million in the current period of 2023 was 13.3% lower than the same period of last year of SAR 172.9 million due to lower operating revenues because of the devaluation in EGP, which is expected to be compensated as we continue increasing prices in EGP.

4. Group operating expenses of SAR 106.1 million were 17.0% lower than the same period of last year of SAR 127.9 million due to cost control initiatives and EGP devaluation.

5. Group operating profit of SAR 43.8 million for the current period of 2023 was 2.7% lower compared to SAR 45.0 million in the same period of last year due to the reasons mentioned above.

6. Net profit in the current period of 2023 amounted to SAR 18.9 million compared to SAR 22.2 million in the same period of last year, a decrease of 14.9%, mainly due to lower revenues because of EGP translation.

7. The Comprehensive loss attributable to shareholders of the Company for the current period amounted to SAR 3.7 million compared to SAR 13.1 million in the same period of last year, due to unrealized exchange loss on translation of foreign investment in Egypt. It is worth noting that investments in Egypt mostly represent production machines and other assets for the purpose of production, manufacturing efficiency, new technologies and generating revenues and not for the purpose of investment. The decline in the value of these investments, because of the depreciation of the Egyptian Pound, does not affect their ability to produce and generate revenues. Accordingly, this amount is a temporary and unrealized decline.

8. Basic Earnings per Share (“EPS”) was SAR 0.33 in the current period of 2023 compared to SAR 0.39 in the same period of last year.

9. Total Shareholders’ Equity on 30 June 2023 was SAR 368.5 million compared to SAR 426.7 million on 30 June 2022, a decrease of 13.6%, due to declaration of dividends, and a negative movement in the Currency Translation Reserve due to unrealized foreign exchange loss on investment in Egypt, as stated above.

In July 2023, the Group, through one of its subsidiary, L’azurde Dubai, sold an administrative office with a net book value of SAR 5.3 million to an external buyer for a consideration of SAR 16.4 million. A profit of SAR 10.1 million will be recognized after deducting related expenses, in the third quarter of year 2023. This is in line with the group's strategy of focusing on productive assets, reducing costs, and providing the necessary liquidity for expansion.

General comments:

The Company successfully pursued its turnaround plan in 2022/2023 and delivered robust results consistently quarter after quarter. Looking ahead, the Company will continue the major innovations undertaken over the last two years and introduce new upcoming growth drivers. We continuously search for and identify innovations and new initiatives to grow our topline, improve our gross margin and operate with a lower working capital. We offer a diversified portfolio of brands including L’azurde, TOUS and Miss L’ while we consolidate our offering to adapt and win in times of changing consumers’ shopping behaviors. We are also mitigating the short-term downsides of the EGP devaluation by increasing our sales prices in EGP, and by launching new products offering great value to consumers and providing us strong margins.

The strategic drivers for the future success of the Company consist of:

1. Expanding 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.

2. Growing our successful L’azurde retail business through new points of sales and a stronger assortment. Especially in KSA, we have a great opportunity to increase the current network of L’azurde retail to a much larger and profitable network, leveraging the very strong brand awareness and 40-year-old legacy. The Company has been successful in finding several promising new retail locations where stores will be opened soon.

3. Optimizing the traditional wholesale business selling jewelry by weight, through more profitable products mix, lower working capital and cost reductions.

4. Leveraging our solid customers’ network in the traditional gold jewelry market to further expand product lines and collections, thereby improving revenues and profits.

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

6. Expanding the TOUS global franchise business in KSA through stronger assortment, new stores and more investments in marketing.

7. Developing new material growth initiatives across the GCC to leverage the Company’s capabilities in markets other than Egypt.

8. Growing our cash position while continuing to generate positive cash flows and reinforcing our solid banking relationships to support the Company’s transformation initiatives.

For more information, we would like to draw the attention of the shareholders that the Condensed Consolidated Financial Statements for the period ended 30 June 2023 will be available on Company’s website (http://www.lazurde.com) under investors’ relations section.