Fawaz Abdulaziz Al-Hokair Co. (Cenomi Retail) Announces Its Annual Financial Results for the Period Ending on 31 December 2023

• Goodwill and asset impairment of SAR 646 million

• Impact of international exit SAR 92 million

• SAR 33 million loss on the disposal of Al-Mubarak Fund (non-core assets).

From an operational perspective:

Revenues: decreased by 5.3% y-o-y to SAR 5,232.2 million in FY-23 compared to SAR 5,525.3 million in FY-22.

Gross profit: decreased by 23.5% y-o-y from SAR 845.3 million in FY-22 to SAR 646.5 million in FY-23. This decrease was primarily influenced by the 5.3% drop in revenues. However, it was partially offset by a 2.0% reduction in the cost of revenue, which decreased from SAR 4,680.1 million in FY-22 to SAR 4,585.7 million in FY-23.

Operating loss of SAR 640.1 million in FY-23 compared to operating income of SAR 328.0 million in FY-22. The loss was primarily driven by one time charge of SAR 772m related to the retail portfolio rationalization impact. In addition, General & Administrative expenses increased 66.2% to SAR 394 million on the back of one-time provisions related to the retail portfolio rationalization program. Excluding these exceptional items, General & Administrative grew 14%.

Net finance costs: increased 56.1% y-o-y to SAR 326.2 million in FY-23, compared to SAR 208.9 million in the corresponding period last year. This increase of SAR 117.3 million was primarily driven by the increase in interest rates.

We draw attention to Note (2-2) of the accompanying consolidated financial statements, which indicates that the Group incurred a net loss of SR 1,113 million during the year ended 31 December 2023, resulting in accumulated losses of SR 1,404 million. In addition, the Group’s current liabilities exceeded its current assets by SR 3,093 million as of 31 December 2023. These events or conditions, along with other matters as set forth in details in Note (2-2) indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

During 2023, solid progress has been made on the retail portfolio rationalization across Saudi Arabia and International markets. As a result of this rationalization, 16 brands were sold, and a number of International markets were either exited or right sized.

The sale of 16 brands, which was finalized in Q1 2024, resulted in 226 stores in Saudi Arabia transferring to Abdullah Al Othaim Fashion Company. The International market exiting, and right sizing resulted in a net closure of an additional 219 stores in 2023. A subsequent Board approval has been given for the sale of an additional five brands: Aldo, Aldo Accessories, Pedro, La Vie en Rose and Charles & Keith and a variation agreement of the Share Purchase agreement (SPA) with Abdullah Al Othaim Fashion Company was amended. The impact, which will be reported during the 2024 fiscal year will result in 121 stores transferring for an agreed consideration of SAR 219 million plus inventory.

2023 saw the continuation of Cenomi Retail’s turnaround strategy which is focused on building Champion brands in Fashion, led by Inditex as well as top tier Food & Beverage brands. In International markets in 2023, Zara and other Inditex brands performed strongly: on a like-for-like basis, Zara sales grew 14.7% while other Inditex brands grew 17.3%. This performance offset softness in Saudi Arabia where Zara like-for-like sales were flat (-0.2%) while other Inditex brands declined 6%. A strong performance was seen across market leader Subway where revenues grew 20-fold thanks to improving revenues per outlet and store expansion.

The Accumulated Losses:

As of December 31, 2023, the accumulated losses totaled SAR 1,403.9 million, representing 122.3% of the capital. The company affirms its commitment to adhering to the procedures and instructions issued by the Capital Market Authority for listed companies on Tadawul and intends to call for an EGM to address the proposed remedies to the capital structure.

• Date of realization of the loss: 27-03-2024

• Date of notifying the Board of Directors with the Accumulated Loss: 29-03-2024

• Major reason leading to the losses: the increase in accumulated losses attributable to shareholders of the company has increased to SAR 1,403.9 million as of 31 December 2023 due to one-time charge of SAR 772m related to impact of portfolio optimization and operational losses during the period.

• Last day for Board of Directors to publish the recommendation for the accumulated losses: 28-05-2024

• Last day for Board of Directors to publish the EGM invitation to consider the company’s continuation: 25-09-2024

• Application of the procedures and instructions: the procedures and instructions for companies whose shares are listed on the Saudi Stock Exchange and whose accumulated losses have reached 20% or more of their capital will be applied.

Q4 Announcements:

On December 07, 2023, Cenomi Retail Announced the signing of a share purchase agreement with Abdullah Al-Othaim Fashion Company to sell a subsidiary that will own the franchise rights for 18 brands delivering on its transformation promise

On December 21, 2023, the boards of directors of Fawaz Abdulaziz Alhokair Company (“Cenomi Retail”) and Arabian Centres Company (“Cenomi Centers”) have mutually agreed to terminate discussions regarding a potential business combination. Both companies acknowledge the strategic merits but believe current conditions and timing are not favorable. Cenomi Centers remains committed to transactions benefiting stakeholders.

Subsequent Announcements:

On March 04, 2024, Cenomi Retail announced its entry into Uzbekistan which represents the eleventh international market for Cenomi Retail a promising market with potential growth bringing the integration of fashion innovation and fashion forward collection to satisfy increasing consumer demand in Uzbekistan.

On March 24, 2024, Cenomi Retail has invited its shareholders to an Extraordinary General Meeting scheduled for April 17, 2024. The agenda includes voting on two matters:

1. The amendment of the company’s bylaw to comply with the new companies’ law, rearranging the bylaw and numbering them to comply with the proposed amendments and

2. The amendment of article (3) of the company’s Bylaws, relating to the company’s Purposes.