(The Group's Comment) Alijarah Net Profit Declines by 31.6% to QR7.14 million

January 28, 2019

• AlIjarah Holding announced its results for 2018, which showed a profit of QR7.14 million compared to QR10.45 million  at the end of 2017, declining by 32%. The fourth quarter of 2018 saw a 91% decrease in profits compared to the same period in 2017. Interestingly, the modified data of 2017 showed QR 10.4 million profit for 2017 instead of QR 3.1 million previously reported, i.e, there is a QR 7.3 million- difference in profit.

The difference is due to the fact that the management has adjusted revenues from property development of Lusail city, thus an increase of 8.3 million, and one million as the costs associated with such works; hence, an increase in the profit of 2017 by around QR7.3 million. This change reflected positively on the accumulated losses.

• Despite the increase in operating revenues from QR 125.4 million in 2017 to QR 168.6 million at the end of 2018 or 35%, the company recorded operating losses of QR 9.2 million for 2018 compared to an operating loss of QR 49.2 million at the end of 2017.These losses were promoted by a rise in the operational and administrative expenses, which accounted for 105% of the total revenues or 139% by the end of 2017.

• The company's financing income at the end of 2018 decreased by 30% to reach QR 18.2 million compared to QR 23.2 million at the end of 2017.

• Earnings for the year 2017 included QR 36.5 million recorded as revenues from revaluation of properties.

• With regard to liquidity, cash balances for the year 2018 decreased by 17% compared to the previous year, standing at QR 579.3 million compared to QR 701.1 million,  with a decrease of QR 122 million, while liabilities decreased by QR 90 million for the same period.

• Customers' premiums declined by QR 32 million or 34% to QR44.6 million compared to QR 67.8 million for 2017. This decrease resulted from a decrease in Islamic financing premiums by QR 7 million,  and rise of provision for loan losses by QR 5 million 2018.  The provision for expected losses to the total outstanding premiums of customers is about 52%, that is, half of the customers are expected to default, which is a high percentage.

 
• The company has applied standard 9, which impacted shareholders' equity as follows: The accumulated losses increased by QR 4.5 million, amortization of the fair value reserve account, zeroed by the end of 2018, instead of recording losses of QR 700,000 in 2017.

• The accumulated losses constitute about 52% of the capital at the end of 2018, accounting for 36% of the shareholders' equity. In this context, the auditor's report included a paragraph stating that the circumstances indicate the uncertainty regarding the continuity of the company's business,  as the accumulated losses surpassed 50% of the capital. The report pointed out in his report that he got confirmation from the board of directors of the company to call for a meeting of the General Assembly to obtain a decision on the continuity of the company's work.

• Regarding cash flow, which measures the company's ability to generate cash from the company's core activities, thus its ability to meet its short-term obligations, the company's net operating cash at the end of 2018 amounted to QR 66.7 million compared to a deficit of QR31.3 million in 2017.  It should be noted that the cash flows of real estate companies are often irregular and dependent on the payments received.

• The board of directors of the company recommended to the General Assembly to be held on February 11, distributing 5% (dividend of 5.44%) of the nominal value of capital as cash dividends for 2018, which is similar to 2017. The meeting will also discuss increasing the ownership limit to 49%.

• The stock is currently traded at a PE multiple of 65.00 times and a book value multipl of 0.51 times.