ANNUAL REPORT 2017 NEW PERSPECTIVES CREATE ATTRACTIVE OPPORTUNITIES Saudi Airlines Catering Annual Report 2017 CONTENTS 1 About Saudi Airlines Catering Company 2 Financial and Operational Highlights 4 Chairman’s Statement 6 Board of Directors 8 CEO’s Review 10 Senior Management STRATEGIC REVIEW 14 Strategy and Business Model 16 Our Markets Business Review 18 In-Flight Catering 22 Retail 26 Catering & Facilities 30 Hajj & Umrah Corporate Review 34 Quality 36 People 38 Technology 40 Procurement and Supply Chain Management 41 Risk Management 44 CORPORATE GOVERNANCE REPORT FINANCIAL REPORT 88 Financial Review 89 Independent Auditors’ Report 92 Statement of Financial Position 93 Statement of Profit or Loss and Other Comprehensive Income 94 Statement of Changes in Equity 95 Statement of Cash Flows 96 Notes to the Financial Statements AT THE HEART OF TRANSFORMATION IN-FLIGHT TOWARDS A CATERING All our operational divisions performed well in 2017, contributing to RETAIL impressive financial results. Continued Pursuing Saudization ensures NEW ECONOMY we fulfil a key role in the diversification was distinguished by development of the national CATERING significant advances in many areas, economy, contributing to the & FACILITIES NATIONAL growth and development of HAJJ & notably railways, retail, automation and UMRAH Saudi men, women, and youth. We are naturally inspired by female employment. Innovation in the concept of Neom – the VISION planned 26,500 km2 economic pilgrim catering has consolidated the ENERGY zone. Our own technology Company’s leadership in this sector. AND WATER ambitions are aligned LIVING AS NEOM’S with those of the iconic FOUNDATION MOBILITY futuristic city. TECHNOLOGICAL AND DIGITAL BIOTECH SCIENCES ABOUT SAUDI AIRLINES CATERING COMPANY Vital strategic elements that underpin our Established in 1981 to provide catering services to the Kingdom’s flag carrier Saudia, Saudi Airlines Catering CUSTOMER operations – human resources, procurement, Company (SACC) has blossomed into a broad and ORIENTATION ENTERTAINMENT FOOD diversified enterprise offering a full suite of food and and technology – have direct links with the beverage, retail, hospitality, and support services to COMMITMENT Kingdom’s Vision 2030. A heightened focus on local and international clients. TO QUALITY MEDIA ADVANCED selective diversification will align Saudi Airlines MANUFACTURING Catering Company with the Kingdom’s Vision 2030, and in areas with emerging demographic VALUES TEAM SPIRIT and economic trends. MISSION To excel as a market leader through continual process improvement, innovation, TRANSPARENCY and timely response, in our customers’ best interests. SUSTAINABILITY ANNUAL REPORT 2017 1 FINANCIAL AND OPERATIONAL HIGHLIGHTS DELIVERING GROWTH Newtechnologyandautomation is creating major savings. Making systems and manuals available on tablets and SACC’s intranet portal has saved about SR1 million. LOUNGE GUESTS REVENUE (SR) NET PROFIT (SR) NET PROFIT MARGIN Newin-flightcateringcontracts have been signed with Flynas, Malindo Air, Himalaya Airlines, and 19% Turkey’s Freebird Airlines and Onur Air. The new 2,684,000 Saudi airline Flyadeal appointed SACC as its in-flight services partner. 2015 2016 2017 2.2 bn 481.7 m 21 % RIYADH 947,000 1,142,000 1,144,000 FirstinternationalSaudiaAlFursanloungeopened in Cairo’s International Airport, in addition to an JEDDAH 797,000 876,000 1,156,000 EARNINGS PER SHARE (SR) PROPOSED DIVIDEND PAYOUT expanded Wellcome lounge in Medina. New lounge DAMMAM 208,000 231,000 257,000 service agreements were concluded with Air France, Flynas, Philippine Airlines, Sri Lankan Air, MEDINA 2,000 9,000 67,000 and Royal Air Maroc. CAIRO – – 60,000 5.72 97.2 % RetailDivision has expanded to manage in-flight shopping for three more airlines, as well as opening 13 new shops. New brands include Retail Trax and 2015 2016 2017 Lounge Café in the railways segment, and the first 1,954,000 2,258,000 2,684,000 Le Cadeau shop at King Abdulaziz University. Duty-free is being opened up through the Company’s joint-venture with Lagardère, the French multinational conglomerate. Catering&FacilitiesDivision improved client retention to 97 percent and won several new DEPENDENCY ON REVENUES FROM SAUDIA FLIGHTS CATERED Saudia MEALS DELIVERED Saudia contracts to serve remote sites. New growth areas Others Others include healthcare, winning contracts with a Private Private pharmaceutical manufacturer and nine Kingdom- 200,000 36.4m wide hemodialysis clinics. 70% Lostbaggage – the contract to manage Saudia’s lost baggage service and warehousing marks 31.0m 144,000 another area of diversification. 141,000 28.2m 28.0m 133,000 67% SACC becamenumberone in the pre-prepared meals concept in catering for Hajj and Umrah 66% 65% pilgrims. 51,800 46,300 64.5% More than 10,000 food samples tested, the 35,000 32,400 32,000 minimum rating was 98 percent. Water samples 31,000 4.7m 4.7m % 4.3m all scored 100 percent. 0.5 0.9m 0.8m 0.7m 2013 2014 2015 2016 2017 2015 2016 2017 2015 2016 2017 2 SAUDI AIRLINES CATERING COMPANY ANNUAL REPORT 2017 3 CHAIRMAN’S STATEMENT SHAREHOLDERS’ EQUITY PROPOSED TOTAL DIVIDEND (SR) 1 . 6% 4 5.55 pershare CREATING A DIVERSE ECONOMY On behalf of the Board of Directors, it is my pleasure and privilege to introduce the Saudi “Since2011,SACChas Arabian Catering Company’s annual report for the year ending December 31, 2017, the 10th achieved 3.71 percent anniversary of SACC’s privatization. compoundannualprofit Inmanyrespects,2017wasachallengingyearforSACC,buttheCompanyreturnedanimpressive setofresults.Despitetheglobaleconomicenvironmentandthecontinuedimpactoflowoilprices growth,underlining onthedomesticfront,theCompanywasabletomaintainahealthyprofitratio.Althoughrevenues andprofitdeclinedslightly,ourperformanceintryingcircumstancesistestimonytothebenefits itsconsistencyin generatedbycontinuedfocusonefficiency,quality,andcostcontrol. generatingvalue Specifically,SACCachievedanetprofitofSR481.74million,7.2percentlowerthantheprevious year,equatingtoearningspershareofSR5.72.Shareholders’equityroseby1.64percentto for shareholders.” SRSR1,282.9million.TheBoardhasrecommendedatotaldividendofSR5.55pershare,subject toratificationbytheGeneralAssembly. Since2011,SACChasachieved3.71percentcompoundannualprofitgrowth,underliningits consistencyingeneratingvalueforshareholders.Strategicandoperationaldecisionsandactions takenin2017aredesignedtosustainthistrend.TheCompanycontinuestodiversifyandreduce itsdependenceonairlinebusinessastheprincipalsourceofrevenue. Thesemeasuresarebeingimplementedinalignmentwithnationalobjectivesasdefinedinthe Vision2030plan.TheCompanyisfullysupportiveofgoalssuchasSaudization,increased economicparticipationbySaudiwomen,andservingtheneedsofthegrowingnumberofHajj andUmrahpilgrims.Ourresponsetotheseobjectivesisfullydetailedinthisreport,alongwith themanyotherinitiativesthatwereundertakenin2017. IexpressmydeepestthankstoallthepartnersandstakeholderswhoaresupportingSACCin theseefforts,aswellastomyfellowmembersoftheBoard,andtomanagementandemployees atalllevelsfortheirhardworkanddedication.Insha’Allah,theyearstocomewillupholdthe Company’simpressiverecordofachievement. Yahya Al-yahya Chairman 4 SAUDI AIRLINES CATERING COMPANY ANNUAL REPORT 2017 5 BOARD OF DIRECTORS YAHYA AL-YAHYA RAED AL-MUDAIHEEM AYMAN AL-TAYYAR Chairman Vice Chairman Board Member Executive Committee Audit Committee Audit Committee Chairman Chairman Member Executive Committee Member ABDULMOHSEN AL-YAHYA SAMI AL-HOKAIR FAHD AL-RASHEED Board Member Board Member Board Member Executive Committee Nomination and Member Renumeration Committee Chairman Executive Committee Member JONATHAN STENT-TORRIANI ABDULLAH TAIBAH SHAWGI MUSHTAG Board Member Board Member Board Member Nomination and Nomination and Nomination and Renumeration Renumeration Renumeration Committee Member Committee Member Committee Member Executive Committee Member 6 SAUDI AIRLINES CATERING COMPANY ANNUAL REPORT 2017 7 CEO’S REVIEW NET PROFIT (SR) REVENUE (SR) DRIVING 481.7 m 2.2 bn EXCELLENCE Continued diversification was a principal theme Female employment–Saudization,particularlythe for SACC during 2017, a year in which we made recruitmentandadvancementofSaudiwomen,is “Byautomatingour significant progress across all our business areas. animportantpriority.Iampleasedtoreportthatwe Each of our operational divisions performed well, havemadeexcellentprogressandthatSaudiwomen processes,wecan and in a year of many highlights I would single accountforverynearly100percentofourtotal generatesignificant out four areas of particular significance. femaleworkforce. benefitsforour Technology–handlingaboutonebilliontransactions HajjandUmrahbusinessiscrucialinthecontextof everyyear,businessefficiencyisatoppriorityfor ournationalculture,welcomingreligiousguestsand company,clients, SACC.Byautomatingourprocesses,wecangenerate economicgrowth.SACChasanimportantresponsibility significantbenefitsforourcompany,clients,and inservingtheneedsofthemillionswhomakethe andsuppliers.” suppliers.Thisinitiativebegantobearfruitin2017, pilgrimageseveryyear.Thisisalsoavaluablemarket, notleastinthevastreductioninthevolumeof andinintroducingtheheat-and-eatpre-preparedmeals paper-baseddocumentation. conceptsosuccessfully,SACCisnowwell-positioned toconsolidateourleadershipinthiscategory. Railways–arelativelynewsegmentforus,butone thatholdsgreatpotential.Havingbeenawarded Lookingahead,ourcompanyhasearnedagreat cateringandretailcontractsfortheDammam-Riyadh reputationinSaudiArabiaandwecontinueto andNorth-Southlines,wecontinuedtoexpand diversifyourportfoliotocapturenewopportunities
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