RIYADH: L’azurde Company for Jewelry has announced a net profit of SAR 77.7 million for the year ended December 31, 2018, which is 43.809% lower than the profit of SAR 31.5 million in the previous year.
The earnings per share (EPS) for 2018 clocked in at SAR 0.41 compared with the EPS of SAR 0.73 in 2017, a notice sent to Tadawul by L’azurde Company for Jewelry noted.
Group operating revenues for the year ended 31 December 2018, amounted to SAR 406.4 million, increased by 14.4% compared to SAR 355.4 million last year. Egypt’s revenues continued to perform strongly with a growth of 51.2% in the wholesale due to a successful advertising campaign and positive recovery in the economy. Egypt’s retail revenues more than doubled in size with a growth rate of 154.1% compared to last year due to the same reasons mentioned above in addition to the successful opening of 4 new shops.
In Kingdom of Saudi Arabia (KSA), wholesale revenues declined by 10.9% mainly due to the introduction of VAT which affected the industry especially in the first quarter of 2018. On the other hand, retail revenues increased by 1.7% due to consolidating two months of revenues of the recently acquired franchise business of Tous, which was consolidated at the end of October 2018.
Gross profit of SAR 244.1 million for the year was 12.2% higher than last year’s gross profit of SAR 217.5 million mainly due to higher operating revenues.
Operating expenses of SAR 174.2 million for the year were 22.5% higher than last year’s operating expenses of SAR 142.2 million mainly due to higher marketing expenses, higher variable expenses related to higher revenues, including the operating expenses of Tous from the date of acquisition, costs of retail expansion in Egypt and additional staff related costs in Kingdom of Saudi Arabia (KSA) including the increases in expat levies.
Operating profit for the year amounted to SAR 69.9 million was lower by 7.1% when compared to SAR 75.3 million in the last year due to higher operating expenses as described above.
Financing cost of SAR 35.6 million for the year was SAR 4.8 million higher than last year, despite reduction in gold borrowing, mainly due to higher SAIBOR and financing costs related to the Tous acquisition.
The decrease was due to higher expenses in the current year which included the results of two months of Tous acquisition which included several one-off costs of due diligence and restructuring of the work force and associated training to meet the Saudization/Feminization requirements. Excluding these one-off costs, the net profit of the group for the year would be SAR 23.1 million, a decrease of 27.0% compared to the last year.
Gross profit, operating profit and net profit represented 60.1%, 17.2% and 4.3% of operating revenues for the current year compared to 61.2%, 21.2% and 8.9% for the last year respectively.
Overall, the Egyptian market continued to recover strongly since the beginning of this year, which resulted in strong growth in revenues in Egypt.
“In KSA, we believe that macroeconomic changes, higher government budgets and additional investments, 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 growing the retail segment of the affordable luxury jewelry through our Tous acquisition, which attracts a higher return on investment,” the notice issued by Lazurde Company for Jewelry.
The company is currently focused revitalize wholesale business through the launch of new premium collections and celebrity based promotions; expand the newly acquired Tous franchise business in KSA; develop profitable L’azurde retail business in Egypt; improve manufacturing productivity by reducing costs, leveraging technology and 3D printing capabilities; improve the profitability of the L’azurde retail business in KSA by rationalizing our footprint, re-invigorating our flagship shops, leveraging our exclusive airports retail operations and staff training; reduce working capital through improved collections, manufacturing efficiencies and accelerated reduction of old stocks; and pursue M&A strategy by identifying attractive targets.
“Considering the above initiatives, and the underlying fundamentals supporting the jewelry industry in the long term, we believe that the L’azurde Group is in a strong position to deliver its longer term growth ambitions,” the notice added.