Independent Auditors’ Report
Annual Report Independent Auditors’ Report Annual Report
16 Independent Auditors’ Report Annual Report
Consolidated Balance Sheet Consolidated Statement Of Income Consolidated Statement Of Changes In Shareholders’ Equity Consolidated Statement Of Cash Flow
2008 Note 2009 SR SR Current Assets
Cash and cash equivalents 3 66,418,421 140,705,169
Accounts receivable 4 309,314,383 415,337,072
Inventory 5 227,471,945 341,742,198
Prepaid expenses and other assets 6 80,494,808 84,390,428
Total current assets 683,699,557 982,174,867
Non-Current Assets Investment in associated company 7 76,522,462 - Property, plant and equipment, net 8 907,176,831 832,521,164
Intangible assets 9 485,829,596 444,660,450
Total non-current assets 1,469,528,889 1,277,181,614
TOTAL ASSETS 2,153,228,446 2,259,356,481
LIABILITIES AND EQUITY
Current liabilities
Murabaha and short-term loans 10 212,704,542 173,475,081
Obligations under capital lease-current portion 11 - 7,000,000 Deferred gains on sale and leaseback transactions current portion 11 - 3,207,511 Deferred revenue 12 13,873,486 11,146,334
Trade payables and other liabilities 13 221,346,931 253,726,102
Zakat and income tax 14 21,080,518 24,789,851
Total current liabilities 469,005,477 473,344,879
17 Independent Auditors’ Report Annual Report
Consolidated Balance Sheet 1963 Consolidated Madina Printing Press (MPP) was Statement Of Income founded as the first subsidiary of Consolidated the SRMG in Jeddah. Statement Of Changes In Shareholders’ Equity 1972 Saudi Research & Publishing Co. Consolidated Statement Of Cash (SRPC) was established, which Flow later became one of the most important publishing houses in the Middle East.
2008 Note 2009 SR SR Non-current liabilities
Murabaha and long-term loans 10 68,346,641 25,970,000
Customers’ deposits 15 26,805,814 26,777,878
Trade payables 16 4,844,245 11,150,236
End-of-service indemnities 17 91,039,966 86,868,761
Total non-current liabilities 191,036,666 150,766,875
TOTAL LIABILITIES 660,042,143 624,111,754
EQUITY
Shareholders› Equity
Share capital 1 800,000,000 800,000,000
Statutory reserve 18 176,619,792 172,084,254
Contractual reserve 18 53,968,268 51,700,502
Restricted governmental grant 8 8,361,425 8,361,425
Foreign currency translation adjustments on investments in 19 (2,271,050) (6,056,341) overseas subsidiaries
Retained earnings 226,914,569 350,162,546
Total shareholders’ equity 1,263,593,004 1,376,252,386
Minority interest 21 229,593,299 258,992,341
Total equity 1,493,186,303 1,635,244,727
TOTAL LIABILITIES AND EQUITY 2,153,228,446 2,259,356,481
The accompanying notes 1 to 33 form an integral part of these consolidated financial statements
18 Independent Auditors’ Report Annual Report
Consolidated Balance 1975 Sheet Arab News, the 1st Saudi Consolidated English daily newspaper Statement Of Income was launched. Consolidated Statement Of Changes In Shareholders’ 1978 Equity Asharq Al-Awsat, a daily Consolidated newspaper founded in Statement Of Cash London-UK by SRPC. Flow
2009 2008 Note SR SR
Revenues 968,532,699 1,342,225,011
Costs of revenues (673,822,780) (838,904,181)
GROSS PROFIT 294,709,919 503,320,830
Declin in inventory prices 5 (20,886,317) -
Equity income of associated companies 7 - 4,351,299
Selling and marketing expenses 23 (37,536,874) (48,776,258)
General and administration expenses 24 (171,549,816) (183,506,571)
Professional and consulting fees (11,344,250) (15,395,163)
Depreciation and amortization (22,776,634) (25,497,746)
Recoverable value of assets’ impairment - 11,292,362
INCOME FROM MAIN OPERATIONS 30,616,028 245,788,753
Other income, net 25 89,237,830 36,407,185
Financial charges, net (16,888,284) (4,935,403)
INCOME FROM CONTINUING OPERATIONS 102,965,574 277,260,535
Non recurring income and expenses, net 26 (27,629,443) 16,590,164
INCOME BEFORE ZAKAT AND INCOME TAX AND MINORITY INTEREST 75,336,131 293,850,699
Zakat and income tax 14 (11,134,085) (17,009,629)
INCOME BEFORE MINORITY INTEREST 64,202,046 276,841,070
Minority interest in net income and loss of subsidiaries 21 (18,846,719) (52,386,534) NET INCOME 45,355,327 224,454,536
Earnings per share
From main operations 27 0.38 3.07
From income before minority interest 27 0.80 3.46
From net income for the year 27 0.57 2.81
The accompanying notes 1 to 33 form an integral part of these consolidated financial statements
19 Independent Auditors’ Report Annual Report
Consolidated Balance Sheet Consolidated Statement Of Income Consolidated Statement Of Changes In Shareholders’ Equity Consolidated Statement Of Cash Flow
2009 2008 SR SR
OPERATING ACTIVITIES
Income before zakat and income tax and minority interest 75,336,131 293,850,699
Adjustments for:
Equity income of associated company - (4,351,299)
Gain from sale of investment in an associated company - (19,786,280)
Depreciation and amortization 46,019,467 47,657,112
Gain from sale of property, plant, & equipment (3,381,090) (1,336,146)
Recoverable value of assets’ impairment - (11,292,362)
Declin in inventory prices 20,886,317 -
Employees’ end-of-service indemnities 19,274,501 16,831,008
Changes in operating assets and liabilities:
Accounts receivable, prepayments and other assets 109,918,309 (53,681,404)
Inventory 93,383,936 (83,148,804)
Deferred revenue 2,727,152 (6,783,018)
Trade payables and other liabilities (39,328,242) (32,292,485)
Customers’ deposits 27,936 385,953
End-of-service indemnities paid (15,103,296) (10,949,271)
Zakat and income tax paid (14,843,418) (19,273,632)
Net cash from operating activities 294,917,703 115,830,071
20 Independent Auditors’ Report Annual Report
Consolidated Balance 1980 Sheet Al-Majalla weekly political magazine Consolidated was launched. Statement Of Income Consolidated 1981 Statement Of Changes Sayidaty, a weekly family magazine In Shareholders’ was launched. Equity Consolidated Statement Of Cash Flow
2009 2008 SR SR
INVESTING ACTIVITIES
Investments in associated company (76,522,462) -
Proceeds from sale of investment in subsidiary - 113,525,250
Acquisition of subsidiaries - (175,474,671)
Purchase of property, plant and equipment (131,272,804) (137,145,081)
Foreign currency adjustment on property, plant and equipment, net (4,404,806) 13,896,561
Proceeds from sale of property, plant and equipment, net 18,383,566 1,995,179
Intangible assets (41,169,146) (2,138,192)
Net cash used in investing activities (234,985,652) (185,340,954)
FINANCING ACTIVITIES
Murabaha and long-term loans 81,606,102 100,147,209
Obligations under capital lease (7,000,000) (37,374,092)
Deferred gains on sale and lease back transactions (3,207,511) (48,048,463)
Foreign currency translation adjustments on investments in overseas subsidiaries 3,785,291 (15,869,151)
Board of Directors’ remuneration (1,800,000) (1,800,000)
Dividends paid (159,356,920) (243,587,531)
Minority interests (48,245,761) (3,802,875)
Net cash used in financing activities (134,218,799) (250,334,903)
Net change in cash and cash equivalents (74,286,748) (319,845,786)
Cash and cash equivalents, January 1 140,705,169 460,550,955
Cash and cash equivalents, december 31 66,418,421 140,705,169
Non-cash transactions:
Restricted governmental grant - 8,361,425
21 Independent Auditors’ Report Annual Report
Consolidated Balance Sheet Consolidated Statement Of Income Consolidated Statement Of Changes In Shareholders’ Equity Consolidated Statement Of Cash Flow
Foreign currency translation adjustments Restricted on investments Share Statutory Contractual governmental in overseas Retained capital reserve reserve grant subsidiaries earnings Total Note SR SR SR SR SR SR SR
Balance, January 1, 2008 1 800,000,000 149,638,800 40,477,775 - 9,812,810 401,176,191 1,401,105,576
Net income for 2008 ------224,454,536 224,454,536
Transfer to statutory reserve 18 - 22,445,454 - - - (22,445,454) -
Transfer to contractual 18 - - 11,222,727 - - (11,222,727) - reserve
Restricted governmental grant 8 - -- - 8,361,425 - - 8,361,425
Foreign currency translation 19 - - - - (15,869,151) - (15,869,151) adjustments, net
Dividends distribution and Board of Directors’ remunera- 20 - - - - - (241,800,000) (241,800,000) tion Balance, December 31, 2008 1 800,000,000 172,084,254 51,700,502 8,361,425 (6,056,341) 350,162,546 1,376,252,386
Net income for 2009 45,355,327 45,355,327
Transfer to statutory reserve 18 - 4,535,538 - - - (4,535,538) -
Transfer to contractual 18 - - 2,267,766 - - (2,267,766) - reserve
Foreign currency translation 19 - - - - 3,785,291 - 3,785,291 adjustments, net
Dividends distribution and Board of Directors’ 20 - - - - - (161,800,000) (161,800,000) remuneration
Balance, December 31, 2009 800,000,000 176,619,792 53,968,268 8,361,425 (2,271,050) 226,914,569 1,263,593,004
22 Notes To The Consolidated Financial Statements
Annual Report Notes To The Consolidated Financial Statements Annual Report
24 Notes To The Consolidated Financial Statements Annual Report
1. ORGANIZATION AND ACTIVITIES
Saudi Research and Marketing Group (the Company) is a Saudi Joint Stock Company registered in Riyadh, Kingdom of Saudi Arabia under Commercial Registration number 1010087772 dated Rabi Al Awal 29, 1421 H (corresponding to July 1, 2000) with a branch in Jeddah with sub commercial registration number 1010087772/001.
The share capital of the Company amounting to SR 800 million is divided into 80 million shares of SR 10 each.
The Company is engaged in trading, marketing, advertising, distribution, printing and publishing.
The Company operates mainly in the Middle East, Europe and North Africa.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared in accordance with the Accounting Standards issued by the Saudi Organization for Certified Public Accountants. The following is a summary of significant accounting policies applied by the Company:
Accounting convention The consolidated financial statements are prepared under the historical cost convention except for investments in associated companies are accounted using the equity basis.
Use of estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates.
Basis of consolidation These consolidated financial statements include the accounts of Saudi Research and Marketing Group and its subsidiaries after eliminating all inter-company balances and transactions for the purpose of consolidation. Investment in investee company is classified as “a subsidiary” based on the level of control exercised by the Company compared to other owners from the actual date of exercising control.
25 Notes To The Consolidated Financial Statements Annual Report
Notes To The Consolidated Financial Statements
Following are the details of consolidated subsidiaries: The company effectively owns the following subsidiaries which are engaged in the same activities.
Commercial Country of Direct and indirect Subsidiary companies Registration number incorporation shareholding
Intellectual Holding Company for Advertisement and Publicity – L.L.C. 1010119045 Saudi Arabia 100%
Scientific Works Holding Company – L.L.C. 1010119043 Saudi Arabia 100%
)Saudi Printing and Packaging Company, Joint stock company (5 1010219709 Saudi Arabia 70%
The following subsidiaries are jointly owned by Intellectual Holding Company for Advertisement and Publicity and by Scientific Works Holding Company:
Country of Subsidiary companies Principal field of activities incorporation
Saudi Research and Publishing Company and its subsidiaries (1) Publishing Saudi Arabia
Saudi Distribution Company and its subsidiaries (2) Distribution Saudi Arabia
Media, papers advertising, promotional Arab Media Company Limited Saudi Arabia and selling services
Media, papers advertising and Al Khaleejiah Advertising and Public Relations Company Saudi Arabia promotional services
Trading in cosmetics, household Saudi Commercial Company Limited Saudi Arabia instruments and printing supplies
Trading in communication equipment Ofoq Information Systems and Communication Company (in liquidation) Saudi Arabia and developing of software
Nmou Media Holding and its subsidiaries (formerly known as Saudi Specialized Publishing Specialized Publishing Saudi Arabia Company) (3)
Moutamarat Company for Exhibitions and Conferences (4) Organize conferences and exhibitions Saudi Arabia
(1) This company owns 100% of subsidiaries registered outside the Kingdom of Saudi Arabia.
(2) This company owns subsidiaries registered in Kuwait and United Arab Emirates at 100% and 90% respectively. The financial statments of Kuwait Group have not been consolidated for the year 2009 since an administrative dispute led to lack of information required to consolidation. Noting that it does not have any significant financial effect to the consolidated financial statments.
26 Notes To The Consolidated Financial Statements Annual Report
SR (3) During the year, one of the subsidiaries, Nmou Media Holding Company (formerly known as Saudi Specialized Publishing Company), commercial registration no. Assets 1010218981 dated Rabi Thani 8, 1427 H and according to the Company’s regulations Cash and cash equivalents 6,099,421 it has been transferred from a limited liabililty company to Saudi closed joint stock company with modification the Company’s name to become Nmou Media Holding Accounts receivable and prepaid expenses 62,058,216 Company. The Company’s capital has been increased to SR 100 million divided into 10 million shares of SR 10 each, note that the regular procedures have been Inventory 34,186,949 completed. Property, Plant, & Equipment 68,905,722
This company owns 100% of subsidiary registered in UAE. During 2008, the Company Intangible Assets 251,387 acquired 51% of three companies in UAE, Saudi Arabia and Jordan; during 2009, the Company acquired the remaining ownership percentages of these companies to Total Assets 171,501,695 become fully owned by Nmou Media Holding Company (formerly known as Saudi Specialized Publishing Company). Subsidiaries’ financial statements have been consolidated as part of the Group financial statements at 51% in 2008 and 100% Liabilities in 2009. Loans from banks and industrial development fund (29,297,871) (4) During 2008, the Group established Moutamarat Company for Exhibitions and Trade payables and other accrued expenses (41,797,338) Conferences with a capital of SR 1,000,000. The company’s main activity is to organize conferences and exhibitions, and to provide marketing services to others. End of Service indemnities (1,136,855) The company’s fiscal year commences on 18 February 2008 (Date of Commercial Registration) and ends on 31 December 2008. The Company is jointly owned by Total Liabilities (72,232,064) Saudi Research and Publishing Company, Saudi Specialized Publishing Company, and Arab Media Company Ltd. Value of net assets acquired 99,269,631 (5) This company owns Tiba Printing and Publishing Company, Hala Printing Company Ltd and AlAoun Factory for Commercial Labels and Flexible Packaging Company Less: Cash and cash equivalents (6,099,421) Ltd. 93,170,210
According to the acquisition agreements signed during 2008 (Tiba Printing and Al- Goodwill 82,304,461 Aoun Factory), all operating activities including revenues, expenses, assets, and liabilities are transferred to the company effective January 1, 2008. The balances as Amount paid for acquisition 175,474,671 of January 1, 2008 were as follows:
27 Notes To The Consolidated Financial Statements Annual Report
Revenues Revenues are recognized upon issuance of invoices for % services delivered to customers and is stated net of trade or quantity discounts, while subscription revenues are Buildings 2 – 3 recognized over the period of subscriptions. Leasehold improvements 10 – 25 Expenses Selling and marketing expenses principally comprise of Printing machinery and equipments 5 – 10 costs incurred to sell and market the Company’s products. All other expenses are classified as general and administration Computer and equipments 10 – 25 expenses. Furniture and fixtures 7.5 – 25 General and administration expenses include direct and indirect costs not specifically part of production costs as Vehicles 15 – 50 required under generally accepted accounting principles. Allocations between general and administrative expenses and cost of revenue, when required, are made on a Leasehold improvements are amortized over the shorter of the consistent basis. estimated useful life or the remaining term of the lease using the straight-line method. Cash and cash equivalents Cash and cash equivalents include cash and bank balances, and time deposits with original maturities of three months or Intangible assets less form the date of acquisition. Mastheads: Mastheads represent the recorded value of the mastheads of the newspapers Inventories and magazines published by the Group. The Group, at each balance sheet Inventories are stated at the lower of cost or net realizable date, tests the mastheads for impairment using fair value method. If any such value. Cost is determined, for work in progress, on a indication exists, the recoverable amount of the asset is estimated in order to weighted average cost basis and includes cost of materials, determine that the book value of masthead is entirely recoverable. Impairment labor and an appropriate proportion of direct overheads. losses of mastheads are recognized as an expense in the consolidated Paper, printing materials, spare parts and other inventories statement of income once its book value exceeds its recoverable amount. are valued on a weighted average cost basis. Impairment loss shall not be subsequently reversed, unless such loss Investment in companies equity originally occurred as a result of special external events of an exceptional Investments in companies which are at least 20% owned and nature that not expected to be repelled, and the recoverable amount clearly in which the Company exercises significant influence are related to such events. accounted for using the equity method of accounting. The Company’s share in the associated companies’ net income/ Goodwill: losses for the year is included in the consolidated statement The goodwill represents the excess of the investment cost over the Company’s of income. Equity method of accounting is stopped if the share in the fair value of the net assets of the subsidiary at the date of investment balance for the investee company becomes nil acquisition. The carrying amount of the goodwill is reviewed at each balance due to continuing losses of such companies (unless the sheet date to determine whether there is any indication of impairment. If any Group has guaranteed the obligations of such a company such indication exists, the goodwill is reduced to the estimated recoverable or is obliged to provide additional financial support). amount.
Property, plant and equipment Distribution, advertising, and publishing rights: Property, plant and equipment are stated at cost less Capitalized distribution and advertising rights, being treated as intangible accumulated depreciation. Expenditure on maintenance assets, are amortized over the estimated period of benefit, which is five years. and repairs is expensed, while expenditure for betterment While publishing rights are amortized over the term of the contract. is capitalized. Depreciation is provided over the estimated useful lives of the applicable assets using the straight-line Impairment of nonfinancial assets method. The carrying amounts of tangible assets are reviewed annually to determine whether there is any indication that those assets have suffered an impairment The estimated depreciation rates of the principal classes of loss. If any such indication exists, the recoverable amount of the assets is assets are as follows: estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the
28 Notes To The Consolidated Financial Statements Annual Report
Company estimates the recoverable amount of the cash generating unit to which the asset belongs. The sale and leaseback transaction is capitalized at the present value of the minimum lease payments at the inception of the lease term. Lease If the recoverable amount of an asset or cash-generating unit is estimated payments are apportioned between the finance charges and reduction to be less than its carrying amount, the carrying amount of the assets or of the lease liability so as to achieve a constant rate of interest on the cash-generating unit is reduced to its recoverable amount. Impairment remaining balance of the liability. Finance charges are charged directly loss is recognized as an expense in the consolidated statement of income against income. immediately. Operating lease payments are recognized as an expense in the Where an impairment loss subsequently reverses, the carrying amount of consolidated statement of income on a straight-line basis over the lease the asset or cash-generating unit is increased to the revised estimate of term. its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no Dividends impairment loss been recognized for the assets or cash-generating unit Profit distributions are recorded in the year in which the General Assembly in prior years. A reversal of an impairment loss is recognized as income approves such distributions. immediately in the consolidated statement of income. Restricted governmental grant Foreign currency transactions Restricted governmental grant has been measured based on the fair Transactions in foreign currencies are recorded in Saudi Riyals at the market value of the asset at the time obtained, subject to adherence to rate ruling at the date of the transaction. Monetary assets and liabilities the restrictions related to the grant. The restricted governmental grant is denominated in foreign currencies are retranslated at the rate of classified as a separate line item under owners’ equity, while the granted exchange ruling at the balance sheet date. All differences are taken to the asset is included in property, plant, and equipment. consolidated statement of income. Derivative financial instruments and hedging For consolidation purposes, the financial statements operations are The Group uses derivative financial instruments such as currency options translated into Saudi Riyals using the exchange rate at the balance sheet to hedge its risks associated with foreign currency fluctuations. Such date, for assets and liabilities, and the average exchange rate for each derivative financial instruments are initially recognized at cost onthe period for revenues, expenses, gains and losses. Components of equity, date on which a derivative contract is entered into and are subsequently other than retained earnings, are translated at the rate ruling at the date of remeasured at fair value. Recognition of profit and loss resulted from this occurrence of each component. Translation adjustments are recorded as transaction depends on the nature of the hedged items. a separate component of shareholders’ equity, if significant. The fair value of currency options is calculated by reference to quoted End-of-service indemnities market prices. If market prices are not readily available, fair value End-of-service indemnities are provided in the financial statements based determined by using other estimated basis, as appropriate. on the Company’s internal policy and Saudi Arabia labor law and applicable laws for employees working with subsidiaries outside Saudi Arabia. In relation to cash flow hedges which meet the criteria for hedge accounting, the portion of the gain or loss on the hedging instrument that is determined Zakat and income tax to be an effective hedge is recognized initially under shareholders’ The Company and its subsidiaries are subject to the Regulations of the equity. However, when the forecast transaction that is hedged results in Directorate of Zakat and Income Tax (“DZIT”) in the Kingdom of Saudi the recognition of an asset or a liability, the gains and losses previously Arabia. The zakat charge is computed on a quarterly basis according to deferred in equity are transferred from equity and included in the initial year end on the zakat base. Any difference in the estimate is recorded measurement of the cost of the asset or liability. The ineffective portion, if when the final assessment is approved, at which time the provision is any, is recognized in the consolidated statement of income. cleared. Overseas subsidiaries provide for income tax liabilities, if any, in accordance with the regulations of the countries in which they operate. Hedges of a net investment in foreign operations resulting in translation Zakat and income tax provision is charged to the consolidated statement adjustment from translating obligations to Saudi Riyals are recognized of income. directly in equity.
Operating leases Hedge accounting is discontinued when the hedging instrument is expired Leases are classified as a capital lease when the terms of the lease or sold. At that point of time, any cumulative gain or loss on the cash flow transfer substantially all of the risks and rewards of ownership to the hedging instrument that was recognized is retained in shareholders’ equity lessee. All other leases are classified as operating leases. until the forecasted transaction occurs. Where the hedged forecasted transaction is no longer expected to occur, the net cumulative gain or Any excess of the selling price over the carrying amount is deferred and loss recognized in equity is transferred to the consolidated statement of amortized on a straight line basis over the lease term. income.
29 Notes To The Consolidated Financial Statements Annual Report
5.1. INVENTORIES
1990 2009 2008 Establishhing of Al-Khaleejiah for Advertising SR SR & Public Relations Company, an advertising & public relations arm as a subsidiary company for the SRMG. Printing papers and packaging materials 169,586,487 249,815,927
Books 48,336,887 33,486,586
Spare parts 15,412,205 11,901,210 3.1. CASH AND CASH EQUIVALENTS Work in progress 7,688,820 36,210,184 2009 2008 SR SR Goods in transit 3,719,819 23,018,707
Others 1,140,181 976,728 Cash and bank balances 66,418,421 78,099,798
245,884,399 355,409,342 Time deposits - 62,605,371 Provision for slow moving items (18,412,454) (13,667,144)
66,418,421 140,705,169 227,471,945 341,742,198
The spare parts inventory primarily relates to property, plant and equipment, 4.2. ACCOUNTS RECEIVABLE accordingly this inventory is expected to be utilized over a period exceeding one year. 2009 2008 SR SR As a result of the current economical situation and the decrease of paper prices, the Group conducted comprehensive review for the calculation of the net realizable value of the inventory as of December 31, 2009. Based Trade receivable 320,291,292 431,715,517 on this review, the Group recorded an amount of SR 20.9 as impairment in inventory prices to arrive to its net realizable value.
Unearned revenue 12,780,875 10,620,309
333,072,167 442,335,826
Provision for doubtful debts (23,757,784) (26,998,754)
309,314,383 415,337,072
30 Notes To The Consolidated Financial Statements Annual Report
6.1. PREPAID EXPENSES AND OTHER ASSETS 7.1. INVESTMENT IN ASSOCIATED COMPANY
During the year, the Company contribution in establishing a Bahraini 2009 2008 closed joint stock company having capital amounted to BHD 28 million SR SR (SR 280 million). The Company paid SR 76.5 million against share of 20% of the Company’s capital including agreed upon premium. All legal formalities have been completed. The Company’s fiscal year starts from June 10, 2009 (date of commercial registration) to December 31, 2010. Prepaid expenses 43,849,300 42,331,420 On July 29, 2008 Saudi Printing and Packaging Company (a subsidiary) Advances to vendors 5,167,372 11,200,621 sold its share in United Printing and publishing company “UPP”. The total value of the sale amounted to SR 117.3 Million and resulted in a net gain Other receivables 31,478,136 30,858,387 of SR 19.8 million. The share in net income of “UPP” is computed based on the financial statements prepared by “UPP” management for the six 80,494,808 84,390,428 months ended on June 30, 2008, which showed net income of SR 4.4 million.
1992 The publishing Al-Eqtisadiah, A daily business newspaper, • Launching Arrajol, a monthly male lifestyle elite magazine, • Launching Hia, a monthly female lifestyle elite magazine.
1994 The publishing of Al-Jamila, a weekly female beauty & health magazine, • Launching Urdu News, 1st Urdu daily newspaper in KSA and GCC. • Launching Malayalam News, 1st Malayalam daily newspaper in KSA and GCC.
31 Notes To The Consolidated Financial Statements Annual Report
8.1. PROPERTY, PLANT AND EQUIPMENT
Printing ma- Leasehold chinery and Computers and Furniture and Capital proj- Land Buildings improvements equipments equipment fixtures vehicles ects Total SR SR SR SR SR SR SR SR SR Cost
January 1, 187,478,888 395,397,967 34,867,035 485,968,562 175,135,801 89,750,061 73,742,241 83,206,133 1,525,546,688 2009
Foreign currency - 3,200,822 2,224,758 - 3,801,378 1,144,190 (19,002) 31,345 10,383,491 adjustment
Additions 81,124,440 18,882,151 950,045 10,339,851 3,804,888 5,441,644 886,683 9,843,102 131,272,804
Disposals (2,695,750) - (464,322) (1,442,000) (6,275,748) (1,712,289) (10,808,709) (8,211,923) (31,610,741)
Transfers - - 3,944,695 63,428,521 5,685,324 - - (73,058,540) - December 31, 265,907,578 417,480,940 41,522,211 558,294,934 182,151,643 94,623,606 63,801,213 11,810,117 1,635,592,242 2009
Depreciation and impairment losses
January 1, 19,187,200 182,568,374 20,681,721 201,623,654 154,343,655 77,575,557 37,045,363 - 693,025,524 2008 Foreign currency - 849,693 783,597 - 3,525,391 820,004 - - 5,978,685 adjustment, net Charge for the - 6,044,556 2,654,112 18,920,068 7,272,510 2,541,616 8,586,605 - 46,019,467 year
Disposals - - (77,609) (330,637) (5,660,775) (1,015,391) (9,523,853) - (16,608,265) December 31, 19,187,200 189,462,623 24,041,821 220,213,085 159,480,781 79,921,786 36,108,115 - 728,415,411 2009
Net book value
December 31, 246,720,378 228,018,317 17,480,390 338,081,849 22,670,862 14,701,820 27,693,098 11,810,117 907,176,831 2009 December 31, 168,291,688 212,829,593 14,185,314 284,344,908 20,792,146 12,174,504 36,696,878 83,206,133 832,521,164 2008
32 Notes To The Consolidated Financial Statements Annual Report
• Some of subsidiaries’ buildings having net book value of During 2008, Nmou Media Holding Company (formerly known as a Saudi Specialized SR 10,167,700 and SR 14,787,021 respectively, are built on Publishing Company) “a subsidiary” acquired 51% of the net assets of 3 companies leased costs with nominal rent charges and ends in 1437 H and in Saudi Arabia, United Arab Emirates, and Jordan. In addition, Saudi Printing and 1436 H respectively, lease contracts are renewable by mutual Packaging Company and Hala Printing Press (group companies) acquired a company in consent. Saudi Arabia. These acquisitions resulted in a total goodwill of SR 82 Million (Note 2).
• All property, plant and equipment relating to Al-Aoun Factory for During the year, the Company increased its ownership in the subsidiaries of Nmou Media Commercial Labels and Flexible Paking Company Ltd. with a Holding Company (formerly known as Saudi Specialized Publishing Company) to be fully book value of SR 69,514,699 (2008: SR 69,983,290) are mort- owned to the Group. The financial statements of these subsidiaries were consolidated gaged for the Saudi Industrial Development Fund (Note 10 C). effective that date. Accordingly, resulted in an additional goodwill of SR 32.4 million.
During 2008, the company has evaluated its land and buildings, The intangible assets projects represent expenses incurred by a subsidiary for the which resulted in an increase in the book value of these assets purpose of establishment of projects related to the visual content and website and other of SR 11.3 million. This increase is recorded in the consolidated projects. statement of income as “Recoverable value of assets’ impairment”. The value of these assets was decreased previously by impairment 1. 10. LOANS AND BANK FACILITIES losses realized in previous years. Saudi Research and Marketing Group (the Company) and Saudi Printing and Packaging During 2008, the Government of Dubai has granted Saudi Re- Company (a subsidiary) both have Treasury Departments to which most of the subsid- search and Publishing Company (a subsidiary) a parcel of land iaries remit their receipts as and when necessary. The Treasury Departments obtain of 29,809-square-feet in Dubai as a restricted grant. The land has credit facilities on behalf of subsidiaries under a master bank facility with local banks. been evaluated at SR 8.4 Million, and is classified as a separate The Murabaha balance represents credit facilities outstanding and used by the Group line item under shareholders’ equity, while the granted asset is in- companies. cluded in property, plant, and equipment.
2009 2008 SR SR
9.1. INTANGIBLE ASSETS 278,844,341 172,634,673 Murabaha finance (A) 2009 2008 SR SR 970,000 2,910,000 Saudi Industrial Development Fund (B)
7,124,157 28,953,248 Mastheads 350,000,000 350,000,000 Short term loans (C)
286,938,498 204,497,921 Goodwill 124,952,826 92,521,345 Total Murabaha finance and loans
Intangible assets “Projects” 9,488,256 1,199,283 (5,887,315) (5,052,840) Less: Deferred finance cost
Publishing rights 1,388,514 939,822 281,051,183 199,445,081 Murabaha finance and loans, net 485,829,596 444,660,450 Less: Current portion of Murabaha (212,704,542) (173,475,081) finance and loans
68,346,641 25,970,000 Non-current portion
33 Notes To The Consolidated Financial Statements Annual Report
(A) During the year, Saudi Research and Marketing Group and Saudi 11.1. OBLIGATIONS UNDER CAPITAL LEASE AND DEFERRED Printing and Packaging Company (a subsidiary) have obtained GAINS ON SALES – LEASE BACK TRANSACTIONS bank facilities from various local banks in the form of short and long term Murabaha finance for a limit of SR 1,020 million. The On August 1, 2006, one of the group’s subsidies sold Thahban’s land and utilized amount at the end of the year was approximately SR 281 related premises to a local bank for SR 130 million through a sale-lease back million to finance the import of materials and equipment relating to agreement with an option to repurchase at the end of lease term. Total future the Company’s activities. The facilities are secured by promissory lease payments amounting to SR 137,320,242 include financial charges of notes to the order of the bank in the amount of such granted SR 7,320,242 which are calculated on an annual fixed rate. facilities. These facilities bear Murabaha finance charges at variable interest rate ranging between (SIBOR+1.5%) to (SIBOR The leased assets represented as follows: + 2% ) and repayable on different periods for each transaction separately.
(B) Al-Aoun Factory for Commercial Labels and Flexible Packaging 2009 2008 Co. Ltd. (a subsidiary of Saudi Printing and Packaging Company), SR SR which was acquired during 2008, has a loan from SIDF for a limit of SR 18 million with a mortgage on the factory’s property ,Plant and equipment in order to finance the factory expansion. The loan Cost agreement includes certain covenants, which provide amongst other items, determining a maximum level of the rents, capital expenditure and profit distributions, and to maintain financial Land 108,875,560 108,875,560 ratios within certain levels. The balance of the loan utilized as of December 31, 2009 amounted to SR 970,000 (2008: SR Building 21,124,440 21,124,440 2,910,000). The loan is repayable on a semi-annual installments as follows: 130,000,000 130,000,000
Accumulated depreciation 2009 2008 SR SR Balance, January 1 631,781 Due date 1,077,744
15/2/1430 - 970,000 Depreciation for building 111,491 445,963
15/8/1430 - 970,000 Balance, December 31 1,189,235 1,077,744
15/2/1431 970,000 970,000 128,810,765 128,922,256
970,000 2,910,000 Transferred to fixed assets (A) (128,810,765) -
- 128,922,256 (C) Al-Aoun Factory for Commercial Labels and Flexible Packaging Net book value at December 31 Co. Ltd. (a subsidiary) has various bank facilities from a number of banks in the form of short-term loans and bank letters of guarantee for a limit of approximately SR 65 million and bear interest at (A) The leased assets were transferred to property, plant and variable rates from (SIBOR + 1%) to(SIBOR + 2). All the granted equipment as the ownership of this asset was transferred to the Saudi facilities are secured by promissory notes amounted to the total Printing and Packaging Company at the end of the lease term. However, granted credit amount. the Saudi Printing and Packaging Company signed a new sale-lease back agreement in respect of Thahban’s land of which the ownership has been transferred to the Saudi Printing and Packaging Company as shown in (b) below.
34 Notes To The Consolidated Financial Statements Annual Report
Total future minimum lease payments under capital lease agreement are as follows:
2009 2008 SR SR
2008 - -
2009 - 7,120,575
Total future payments under capital lease agreement - 7,120,575
Less: Deferred finance charges - (120,575)
Present value of future payments under capital lease agreement - 7,000,000
Less: Obligation under capital lease – current portion - (7,000,000)
Obligation under capital lease – non current portion - -
The deferred gain on sale and lease back agreement represents the difference between the agreement value and net book value of the sold assets. The deferred gain that will be amortized over 12 months has been presented in the current liabilities.
Total deferred gain on sale and lease back agreement: 2009 2008 SR SR
Total capital lease agreement 130,000,000 130,000,000
Net book value of the sold assets (33,780,240) (33,780,240)
Total deferred gain on the sale - lease back agreement 96,219,760 96,219,760
Less:
Gains recognized in previous year 93,012,423 54,524,524
Gains for the year included in consolidated statement of income 3,207,337 38,487,899
Total amortization at December 31 96,219,760 93,012,423
Net deferred gain on sale – lease back agreement - 3,207,337
Less: Deferred gains on sale - lease back agreement - 3,207,337 - current portion
Deferred gain on sale – lease back agreement – non current portion -- -
On June 7, 2009, the Saudi Printing and Packaging Company sold Thahban’s land, amounting to SR 108,875,560, of which its ownership has been transferred to the Saudi Printing and Packaging Company on February 28, 2009, as explained in (A) above. The land was sold to a local bank for SR 190 million through a sale-lease back agree- ment with an option to repurchase at the end of lease term that ends on July 6, 2011 or at a prior date. The present value for the leased land is SR 190 million and according to the lease agreement the proceeds from the lease agreement amounting to SR 190 million will be deposited in the bank as Murabaha investment and pledged against the lease payments. The total future lease payments amounting to SR 195,293,957 include financial charges of SR 5,293,957 calculated based on a variable interest rate.
35 Notes To The Consolidated Financial Statements Annual Report
During December 2009, the Saudi Printing and Packaging Com- The movement in the zakat provision during the year is as follows: pany paid all future lease payments against its Murabaha invest- ment account mentioned above and settled the agreement with 2008 the bank. The ownership of the land been transferred to the Saudi 2009 SR SR Printing and Packaging Company and the related book value of SR 190 million were transferred to the property, plant and equipments Balance, January 1 23,033,401 24,411,799 and recognized the whole realized gain from the sale amounting to SR 81,124,440 in the consolidated income statement. Provision for the year 9,644,416 15,405,754
Payments during the year (12,272,356) (16,784,152) 12.1. DEFERRED REVENUE Balance, December 31 20,405,461 23,033,401 Deferred revenue represents subscriptions received in advance. This amount will be subsequently recognized as revenue over the period of During 2008, the Company received the modified zakat assessment for the years subscriptions. 1989 till 2000 which shows decrease in the additional claims from SR 24 million to SR 1.9 Million. The company has paid the amounts due and received the final 2. TRADE PAYABLES AND OTHER LIABILITIES 13. settlement for these years.
The Company and its subsidiaries have filed the zakat returns up to year 2006. 2009 2008 Management believes that adequate provisions has been made against poten- SR SR tial liabilities to the department of Zakat and Income Tax (DZIT) that may arise upon the final settlement, based on the final zakat assessments.
During 2008, the Company obtained DZIT approval to submit consolidated Accrued expenses 126,127,387 103,619,886 zakat return for the Company and subsidiaries. The Company actually submit- ted its zakat return for the years 2007 and 2008 respectively which is still under Trade and notes payable (Note 16) 77,646,319 89,245,289 review by DZIT.
1. CUSTOMERS’ DEPOSITS Dividends payable 1,694,071 1,050,991 15. These represent amounts received from the distribution outlets for selling news- Other payables 38,386,655 37,302,435 papers and other publications.
2. TRADE PAYABLES 221,346,931 253,726,102 16. These represent amounts relate to equipments and vehicles purchased on in- stallment. No commission is charged on these amounts. The balance is payable on monthly installments that vary. The installments due in 2009 amounted to 14.3. ZAKAT AND INCOME TAX SR 6.5 million, are included as part of trade payables and other credit balances (Note 13).
2009 2008 17.3. END-OF-SERVICE INDEMNITIES SR SR The movement in the provision during the year is as follows:
Zakat 20,405,461 23,033,401 2009 2008 SR SR Income tax 675,057 1,756,450 Balance, January 1 86,868,761 79,850,169
Provision for the year 19,274,501 17,967,863 21,080,518 24,789,851 Payments during the year (15,103,296) (10,949,271)
Balance, December 31 91,039,966 86,868,761 The consolidated zakat liability of the Group for the year represents the zakat calculated based on the unconsolidated Financial Statements of Saudi Research and Marketing Group, in addition to the Group’s share in the zakat liabilities of its subsidiaries.
36 Notes To The Consolidated Financial Statements Annual Report
18.1. RESERVES
Statutory reserve In accordance with Saudi Arabian Regulations for Companies, 10% of net income for the year has been transferred to the statutory reserve. The Company may resolve to discontinue such transfers when the reserve totals 50% of the share capital. The statutory reserve is not available for distribution.
Contractual reserve In accordance with the Articles of Association, the Company must set aside 5% of its net income for the year to the contractual reserve until it has built up a reserve equals to 25% of the share capital. The contractual reserve may be used for any purpose authorized by the Board of Directors.
19.2. FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON INVESTMENTS IN OVERSEAS SUBSIDIARIES
The translation adjustments comprise all foreign exchange differences arising from translation of the financial statements of foreign operations, as well as from the translation of liabilities that hedge the Group’s net investments in foreign subsidiaries.
20.3. DIVIDENDS PAID
The General Assembly, in its annual meeting held on 18 Rabi Al Awal 1429 H (corresponding to March 26, 2009) approved the distribution of dividends amounted to SR 160 million (SR 2 per share) from the balance of retained earnings as at December 31, 2008 and resolved to pay SR 1.8 million as Board of Directors’ remuneration.
21.4. MINORITY INTEREST
Minority interest represents the part of the net results of operations and of net assets of the subsidiaries attributable to interests, which are not owned, directly or indirectly through subsidiaries, by the parent company.
The minority share in subsidiaries is as follows:
Emirates Printing, Publishing and Saudi Printing University Distribution and Packaging Bookshop Company Company Group 2009 2008 SR SR SR SR SR
At the beginning of the year 47,679 237,562,611 21,382,051 258,992,341 210,408,682
Investments acquired during the year - - (21,382,051) (21,382,051) 14,197,125
Share in subsidiaries’ net income (loss) (125,183) 18,971,902 - 18,846,719 52,386,534
Settlements and payments during the year 136,290 (27,000,000) - (26,863,710) (18,000,000)
58,786 229,534,513 - 229,593,299 258,992,341
37 Notes To The Consolidated Financial Statements Annual Report
22.1. RELATED PARTY TRANSACTIONS
The Group during the year has made the following transactions with related parties:
2009 2008 SR SR
Purchase of property and equipment (Note 15 ) - 17,338,302
B.O.D. executive members’ salaries and remunerations 8,770,000 9,765,000
Board of directors’ expenses and allowances 347,780 496,337
23.2. SELLING AND MARKETING EXPENSES 2009 2008 SR SR
Salaries, wages and benefits 24,247,775 24,743,806
Publicity, advertising, promotions, and seminars 9,768,816 12,380,277
Provision for doubtful debts - 6,983,501
Other 3,520,283 4,668,674
37,536,874 48,776,258
24.3. GENERAL AND ADMINISTRATION EXPENSES 2009 2008 SR SR
Salaries, wages and other benefits 118,715,986 121,662,013
Rent 11,777,761 12,236,253
Public relations 2,754,942 2,208,868
Postal, telephone and fax 4,546,888 5,022,954
Insurance 4,414,854 4,549,721
Travel expenses 4,173,828 5,160,416
Maintenance 4,085,215 4,722,626
Electricity and water 3,542,673 3,499,523
Stationery 2,810,673 2,131,294
Computer services 2,196,463 3,315,449
Shipping, packing and customs 2,139,896 3,295,349
Provision for slow moving inventories 123,619 5,491,984
Other 10,267,018 10,210,121
171,549,816 183,506,571
38 Notes To The Consolidated Financial Statements Annual Report
25.4. OTHER INCOME - NET 2009 2008 SR SR
Gain on a sale and leaseback transactions (Note 11) 84,331,777 48,048,463
Rental income 583,900 357,289
Gain (loss) on disposal of property, plant and equipment 3,381,090 1,336,146
Loss on foreign currency translation 10,629 (868,949)
Miscellaneous – net 930,434 (12,465,764)
89,237,830 36,407,185
5.26. NON-RECURRING INCOME AND EXPENSES, NET Non-recurring income and expenses comprise the following:
2009 2008 SR SR
Gain on sale of the Company’s share in United Printing & Publishing Co. (Note 7) - 19,786,280
Loss from discontinued operations (B) (6,098,954) (3,196,116)
Non-recurring expenses (21,530,489) -
Total (27,629,443) 16,590,164
(A) Loss from discontinued operations: For the purpose of restructuring the subscription activity in the group, the management has decided during the first half of 2009 to stop and closure of some publications and some offices subsidiaries and transfers some activity and consolidated in another subsidiaries to another.
(B) Non-recurring expenses: As a result of the current economical situations, the Company appointed financial advisor to study the Company’s policies and procedures used in determining and measuring the assets and liabilities of the Company for the purpose of identifying the quality of these assets and liabilities. The Company adopted the suggestions and recommendations that were appropriate to the Company’s activities and conditions in the current economical situations.
None-recurring expenses for the year 2009 incurred by the Group and its subsidiaries in relation to its plan for organizational and administrative restructuring for some of the Company’s segments, it includes salaries, travelling and transportation expenses, in addition to demobilization of equipments to its new locations.
39 Notes To The Consolidated Financial Statements Annual Report
2006 27.1. EARNINGS PER SHARE • Saudi Specialized Publishing • Earnings per share from main operations is calculated by dividing the income Company was established officially. from main operations for the year by the weighted average number of shares • Acquiring Hala Printing Press (HPP) outstanding for the year ended December 31, 2009 of 80 million shares. • SRMG goes public, as the group launches IPO, the Group was the 1st • Earnings per share before minority interest is calculated by dividing the income before minority interest for the year by the weighted average number of shares media company to be public. outstanding for the year ended December 31, 2009 of 80 million shares.
• Earnings per share from net income is calculated by dividing the net income for 2007 the year by the weighted average number of shares outstanding for the year Saudi Printing & Packaging Company ended December 31, 2009 of 80 million shares. (SPPC) goes public, representing the printing arm of the Group that holds all 28.2. SEGMENT INFORMATION printing facilities of the Group (MPP, HPP, and UPP). These are attributable to the Group’s activities and business as approved by the management to be used as a basis for the financial reporting and being consistent with the internal reporting process. Transactions between the business segments 2008 are conducted on an arm length basis. • SSPc Acquired 51% of University The segment results and assets comprise items that are directly attributable Bookshop Companies. to certain segment and items that can reasonably be allocated between various business segments. Unallocated items are included under “other”.
2009 The Group is organized into the following main business segments: • SSPc Acquired 49% of University Bookshop Companies. Publishing comprises the local and international publishing works, researches and • SSPC launched Madame Figaro marketing the Group products and third party products. Arabia, Domus Arabia and Parents Specialized Publishing comprises publishing of specialized publications for third Arabia Magazines. parties, publishing licensed international titles, publishing of school and university books, translation services, and selling electronic and visual content.
Distribution comprises distribution of newspapers, magazines, publications and books locally and internationally of the Group products and others.
Advertising comprises local and international advertising, production, representation and marketing audio visual and machine readable advertising media, and outdoor advertising locally and internationally.
Printing comprises printing works to the Group and to others.
Other comprises head office, general management, investing activities and other.
40 Notes To The Consolidated Financial Statements Annual Report
28. SEGMENT INFORMATION - Continued
Specialized Publishing Distribution Advertising Printing Other Total Elimination Consolidation Publishing SR SR SR SR SR SR SR SR SR
As of December 31, 2009
Revenue 737,991,773 106,350,412 124,798,151 132,246,842 361,490,288 305,693 1,463,183,159 (494,650,460) 968,532,699
Gross profit 103,476,794 31,469,048 32,020,287 62,642,831 70,762,949 305,693 300,677,602 (5,967,683) 294,709,919
Net book value of property, 171,024,354 9,939,126 34,514,367 27,282,810 647,704,270 16,711,904 907,176,831 - 907,176,831 plant and equipment
Total assets 404,477,466 234,332,134 124,511,800 210,061,072 1,024,228,309 1,462,617,886 3,460,228,667 (1,307,000,221) 2,153,228,446
Total liabilities 105,243,649 129,604,087 108,303,442 133,935,875 257,862,266 205,879,714 940,829,033 (280,786,890) 660,042,143
As of December 31, 2008
Revenue 941,921,106 115,887,077 195,681,021 213,798,986 468,251,216 952,169 1,936,491,575 )594,266,564( 1,342,225,011
Gross profit 157,734,535 43,152,727 44,473,322 129,698,692 140,803,664 952,169 516,815,109 )13,494,279( 503,320,830
Net book value of property, 178,986,034 3,285,754 43,422,358 33,243,508 557,269,278 16,314,232 832,521,164 - 832,521,164 plant and equipment
Total assets 402,050,114 188,134,007 155,553,783 279,704,902 1,069,803,283 1,449,243,512 3,544,489,601 )1,285,133,120( 2,259,356,481
Total liabilities 136,868,275 135,445,548 128,957,615 185,594,754 276,828,383 94,585,892 958,280,467 )334,168,713( 624,111,754
Substantially, all the Group’s operating assets are located in the Kingdom of Saudi Arabia. Principal markets for the Group’s products are the Middle East, Europe and North Africa. It is not practicable to disclose information to individual geographic areas.
1.29. CONTINGENT LIABILITIES
Certain of the Group’s subsidiaries are involved in various litigation matters in the ordinary course of business, which are being defended. While the ultimate results of these matters cannot be determined with certainty, management does not expect that they will have a material adverse effect on the consolidated financial statements of the Group.
The Group’s bankers have issued on its behalf, bank guarantees with a maximum of SR 18.5 million (2008: SR 20.8 million).
The Company has engaged in a foreign currency hedge with a local bank amounting to GBP 12 million effective January 1, 2009 to cover the risk of foreign currency cash flow from its operational activities outside the Kingdom of SaudiArabia.
41 Notes To The Consolidated Financial Statements Annual Report
30.1. OPERATING LEASES currency options contracts have expiration dates of less than one year. Commitment for minimum lease payments under non cancelable operating leases and lease contracts of advertising sign boards location are: The Group classifies its currency options as cash flow hedges and states them at fair value. The fair value of currency option at the balance sheet date was nil as the contract expired before year-end. 2009 2008 SR SR In respect of other monetary assets and liabilities held in currencies other than Saudi Riyals, the Group ensures that the net exposure is Less than one year 16,178,001 25,845,388 kept to an acceptable level by buying or selling foreign currencies at Between one and five years 19,759,243 57,661,740 spot rate where necessary.
More than five years 1,048,600 3,512,666 32.3. FAIR VALUES OF FINANCIAL INSTRUMENTS
36,985,844 87,019,794 Fair value is the amount for which an asset could be exchanged, or a liability settled between knowledgeable willing parties in an arm’s length transaction. Financial instruments comprise of financial assets, During the current year, SR 21,225,163 (2008: SR 24,860,048) was recognized financial liabilities and derivatives. as an expense in the consolidated statement of income in respect of operating leases. The Group’s financial assets consist of cash and cash equivalents and receivables. Its financial liabilities consist of bank overdrafts, term 31.2. RISK MANAGEMENT loans, payables, accrued expenses and obligations under capital lease. Its derivatives consist of currency options and commission Interest rate risk rate swaps. The Group has no significant interest bearing long term assets, but has interest bearing liabilities at December 31, 2009. The Group manages its interest rate The fair values of financial instruments are not materially different risk by keeping floating rate long term loans at an acceptable level. from their carrying values. Credit risk 4. COMPARATIVE FIGURES The Group seeks to limit its credit risk with respect to customers by setting 33. credit limits for individual customers and monitoring outstanding receivables. Certain figures for 2008 have been reclassified to conform tothe Investments are allowed only in liquid securities with counterparties that have presentation in the current year. a sound credit rating. At the balance sheet date, no significant concentration of credit risk was assessed. 34.5. APPROVAL OF FINANCIAL STATEMENTS AND APPROPRIATION OF NET INCOME Liquidity risk The Board of Directors, in its meeting held on Rabi Al Awal 9, 1431 H The Group limits its liquidity risk by ensuring bank facilities are available. (corresponding to February, 23, 2010), approved the consolidated financial statements. The Board also proposed in its meeting to Currency risk distribute dividends of SR 40 million (SR 0.50 per share) which is Exposure currency risk arises in the normal course of the Group’s business. subject to the approval of the shareholders at the Annual General Derivative financial instruments are used to reduce exposure to fluctuations Meeting. in foreign exchange rates. While these are subject to the risk of market rates changing subsequent to acquisition, such changes are generally offset by opposite effects on the items being hedged.
The Group is exposed to foreign currency risk on expenses that are denominated in a currency other than Saudi Riyal. The currency giving rise to this risk is primarily Pounds Sterling.
At any point in time the Group hedges all of its estimated foreign currency exposure in respect of forecasted expenses over the following months. The Group uses currency options to hedge its foreign currency risk. Most of the
42