abdullah al-othaim markets company (saudi joint...

ABDULLAH AL-OTHAIM MARKETS COMPANY

(SAUDI JOINT STOCK COMPANY)

CONSOLIDATED FINANCIAL STATEMENTS AND

AUDITORS’REPORT

FOR THE YEAR ENDED DECEMBER 31, 2012



CONSOLIDATED FINANCIAL STATEMENTS AND AUDITORS' REPORT


INDEX PAGE

Auditors' report 1

Consolidated balance sheet 2

Consolidated statement of income 3

Consolidated statement of cash flows 4

Consolidated statement of changes in shareholders’ equity 5

Notes to the consolidated financial statements 6 – 18



CONSOLIDATED BALANCE SHEET

AS AT DECEMBER 31, 2012

The accompanying notes form an integral part of these consolidated financial statements

-2-

Notes

2012

SR

2011

SR

ASSETS

Current assets

Cash on hand and at banks 63,478,659 43,619,168

Inventories, net 3 321,789,805 311,353,260

Prepayments and other receivables 4 79,885,395 105,464,896

Total current assets 465,153,859 460,437,324

Non-current assets

Investments in associated companies and others 6 174,018,032 118,945,249

Property and equipment, net 7 1,075,859,844 1,024,756,613

Projects in progress 8 36,517,123 58,260,734

Intangible assets, net 11,876,824 13,215,328

Total non-current assets 1,298,271,823 1,215,177,924

TOTAL ASSETS 1,763,425,682 1,675,615,248

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities

Short-term loans and Murabahas 9 (a) 78,193,602 61,432,944

Current portion of long-term loans and Murabahas 9 (b) 105,399,512 103,346,089

Trade payables 656,122,209 694,779,387

Other payables and accrued expenses 10 101,337,415 83,062,487

Total current liabilities 941,052,738 942,620,907

Non-current liabilities

Provision for End-of-service benefits 41,068,395 35,461,372

Long-term loans and Murabahas 9 (b) 100,858,757 166,230,587

Total non-current liabilities 141,927,152 201,691,959

Total liabilities 1,082,979,890 1,144,312,866

Shareholders' equity

Share capital 1 225,000,000 225,000,000

Statutory reserve 12 74,159,034 56,982,411

Voluntary reserve 13 12,453,336 12,453,336

Retained earnings 368,757,084 236,667,477

Unrealized gains from investments in available-for-

sale securities 76,338 199,158

Total shareholders' equity 680,445,792 531,302,382

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,763,425,682 1,675,615,248

ABDULLAH AL-OTHAIM MARKETS COMPANY (SAUDI JOINT STOCK COMPANY) CONSOLIDATED STATEMENT OF INCOME



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Notes

2012

SR

2011

SR

Revenues

Sales 4,105,198,404 3,942,797,390

Rent 5 160,978,268 148,115,441

Total revenues 4,266,176,672 4,090,912,831

Cost of revenues (3,940,929,175) (3,767,767,726)

Gross profit 325,247,497 323,145,105

Selling and distribution expenses 17 (113,878,296) (115,020,839)

General and administrative expenses 18 (55,244,940) (50,502,628)

Income from continuous main operations 156,124,261 157,621,638

Company’s share in net profits of the

associate companies 6 30,151,720

12,655,583

Impairment of an investment 6 (929,491) -

Finance expenses (10,910,445) (12,516,125)

Other income (expenses), net 1,080,185 (4,177,922)

Income before zakat 175,516,230 153,583,174

Zakat (3,750,000) (3,500,000)

NET INCOME 171,766,230 150,083,174

Earnings per share 14

From continuous main operations 6.94 7.01

From net income 7.63 6.67

ABDULLAH AL-OTHAIM MARKETS COMPANY (SAUDI JOINT STOCK COMPANY) CONSOLIDATED STATEMENT OF CASH FLOWS



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2012 SR

2011 SR

OPERATING ACTIVITIES


Adjustments for:

Depreciation 82,753,690 73,976,900

Amortization of intangible assets 1,338,504 1,338,504

Losses (Gains) on sale of property and equipment 613,766 (749,181)

Impairment of an investment 929,491 -

Company’s share in net profits of the associate companies (30,151,720) (12,655,583)

Provision for end-of-service benefits 5,607,023 6,577,853

Changes in working capital:

Inventories (10,436,545) (26,077,528)

Prepayments and other receivables 25,579,501 (16,720,398)

Trade payables, other payables and accrued expenses (20,362,202) 119,574,359

Zakat paid (3,770,048) (3,712,420)

Net cash from operating activities 227,617,690 295,135,680

INVESTING ACTIVITIES

Investments in associated companies and others (45,098,374) (900,000)

Additions to property, equipment and projects in progress (114,795,803) (209,666,747)

Dividends received from an associated company 19,125,000 -

Proceeds on sale of property and equipment 2,068,727 1,151,760

Net cash used in investing activities (138,700,450) (209,414,987)

FINANCING ACTIVITIES

Loans and Murabahas (46,557,749) (19,837,431)

Cash dividends (22,500,000) (67,500,000)

Net cash used in financing activities (69,057,749) (87,337,431)

Net change in cash on hand and at banks 19,859,491 (1,616,738)

Cash on hand and at banks at January 1 43,619,168 45,235,906

CASH ON HAND AND AT BANKS AT DECEMBER 31 63,478,659 43,619,168

Non cash transactions:

Unrealized (losses) gains on investment in available-for-sale

securities (122,820) 199,158

ABDULLAH AL-OTHAIM MARKETS COMPANY (SAUDI JOINT STOCK COMPANY) CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY



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Notes

Share capital

SR

Statutory

reserve

SR

Voluntary

reserve

SR

Retained

earnings

SR

Unrealized gains

from investments

in available-for-

sale securities

SR

Total

SR

Balance at January 1, 2011 225,000,000 41,974,094 12,453,336 169,092,620 - 448,520,050

Net income for year 2011 - - - 150,083,174 - 150,083,174

Transfer to statutory reserve 12 - 15,008,317 - (15,008,317) - -

Unrealized gains on investment

in available-for-sale securities

-

-

-

-

199,158

199,158

Cash dividends 15 - - - (67,500,000) - (67,500,000)

Balance at December 31, 2011 225,000,000 56,982,411 12,453,336 236,667,477 199,158 531,302,382

Net income for year 2012 - - 171,766,230 - 171,766,230

Transfer to statutory reserve 12 - 17,176,623 - (17,176,623) - -

Unrealized losses on investment

in available-for-sale securities

-

-

-

- (122,820) (122,820)

Cash dividends 15 - - - (22,500,000) - (22,500,000)

Balance at December 31, 2012 225,000,000 74,159,034 12,453,336 368,757,084 76,338 680,445,792



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


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1. ORGANIZATION AND ACTIVITY

Abdullah Al-Othaim Markets Company is a Saudi Joint Stock company registered in

Riyadh on Rajab 7, 1400 (May 21, 1980) under Commercial Registration Number

1010031185. The Company was converted from a limited liability into a joint stock

Company according to the ministerial decree No. 227/G on Ramadan 3, 1428

(corresponding to September 15, 2007).

The share capital of the Company amounting to SR 225 million is divided into 22.5

million shares of SR 10 each.

The Company’s main activity is to undertake wholesale trading in food supplies, fish,

meat, cars and its spare parts, agricultural crops and livestock, household

equipment, constructing, managing, operating and maintaining of super markets

and malls, cooked and non-cooked catering services, computer services, operating

and maintaining electrical and mechanical equipment, constructing, operating and

maintaining of storage and cooling warehouses.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements have been prepared in

accordance with the accounting standards generally accepted in the Kingdom of

Saudi Arabia issued by the Saudi Organization for Certified Public Accountants. The

following is a summary of significant accounting policies applied by the Company.

Basis of consolidation

During 2011, the Company established limited liability companies in the Kingdom of

Saudi Arabia which are fully owned, directly and indirectly, by the Company. The

investment in these companies in year 2011 was stated at cost since the financial

statements for these companies have not been prepared and the companies did

not engage in any commercial activities during year 2011. Therefore, they were not

consolidated in 2011.

The consolidated financial statements include the financial statements of Abdullah

AlOthaim Markets Company (the "Company") and the financial statements of the

following subsidiaries: Capital Ownership %

SR Direct Indirect

Haley Holding Co. 100,000 99% 1%

Universal Marketing Center Co. 100,000 99% 1%

Seven Services Co. 100,000 99% 1%

Bayt Alwatan Co. 100,000 99% 1%

Marafeq Tashgheel Co. 500,000 - 100%



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of estimates

The preparation of consolidated financial statements in conformity with generally

accepted accounting standards requires the use of estimates and assumptions that

could affect the reported amounts of assets and liabilities and disclosure of

contingent assets and liabilities at the date of the financial statements in addition to

the reported amounts of revenues and expenses during the year. Although these

estimates are based on management’s best knowledge of current events and

activities available with the management, actual results may ultimately differ from

those estimates.

Accounting convention

The consolidated financial statements are prepared under the historical cost and

accrual basis conventions, except for the Investment in available-for-sale securities

which is accounted for using fair value and investment in associated companies

which are accounted for using equity method.

Revenue recognition

Sales are recognized upon delivery of goods to customers. Income from rent is

recognized on accrual basis over the period of lease contracts.

Expenses

Selling and distribution expenses principally comprise of costs incurred in the

distribution and sale of the Company’s products. All other expenses are classified as

general and administrative expenses.

General and administrative expenses include direct and indirect costs not specifically

part of cost of revenues as required under generally accepted accounting

standards. Allocations between general and administrative expenses and cost of

revenues, when required, are made on consistent basis.

Cost of sales

Cost of sales includes the cost of purchases and expenses related to the outlets.

Accounting for lease agreements

All leases entered into by the Company are classified as operating leases. Rental

payments are charged to the statement of income using the straight-line method

over the term of the operating lease contract.

The lease amounts received by the Company as a lessor in operating lease contracts

are recognized in the statement of income using the straight-line method over the

period of the related leases.





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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investments in Associated companies and others

Investment in an associated company which is 13.65% owned and in which the

Company exercises significant influence through its participation in its financial and

operational policies is accounted for using equity method, under which the

investment is initially stated at cost and adjusted thereafter for the change in the

Company's share in net assets of the investee. Company's share of the net profit or

loss of the investee is reported in the consolidated statement of income.

Investments in companies which are less than 20% owned and where the fair value is

no readily determinable are stated at cost. Appropriate provision is made for any

other than temporary impairment in the value of these investments. Income is

reported upon declaration.

Investments in securities are classified in the balance sheet as investments available

for sale at fair value. Unrealized gains or losses are reported in the equity. Realized

gains or losses on disposal of investments in securities available for sale are reported

in the income statement. Dividends from investments available for sale are reported

in the income statement.

If the fair value is not available, these investments are stated at cost. Cost is adjusted

to reflect any other than temporary impairment in the value.

Inventories

Inventories are stated at the lower of cost or market value. Cost is determined using

the weighted average costing method.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation.

Depreciation is provided over the estimated useful lives of the applicable assets using

the straight line method. Leasehold improvements and buildings constructed on

leased lands are amortized over the shorter of the estimated useful life of these assets

or the remaining term of the lease. The estimated lives of the principal classes of

assets are as follows:

Years

Machinery and equipment 10

Buildings 5 – 25

Vehicles 5 – 7

Computers 5 – 7

Furniture and fixtures 7

Leasehold improvements 10





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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of long-term assets

The Company reviews on regular basis the carrying amount of its tangible assets to

determine whether there is any indication that those assets have suffered impairment

in value. In case such indication exists, the recoverable amount of the assets is

estimated in order to determine the extent of the impairment, if any. Where it is not

possible to estimate the recoverable amount of individual assets, the Company

estimates the recoverable amount of the cash generating unit to which the asset

belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less

than its carrying amount, the carrying amount of the asset or cash-generating unit is

reduced to its recoverable amount. Impairment loss is recognized as an expense in

the consolidated statement of income immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset or

cash-generating unit is increased to the revised estimate of its recoverable amount,

but so that the increased carrying amount does not exceed the carrying amount

that would have been determined had no impairment loss been recognized for the

asset or cash-generating unit in prior years. A reversal of an impairment loss is

recognized as income in the consolidated statement of income immediately. Borrowing cost

Borrowing costs directly attributable to acquisitions or constructions of qualifying

assets, which are the assets that necessarily take a substantial period of time to get

ready for their intended use or sale, are added to the cost of those assets until the

assets are substantially ready for their intended use or sale. All other borrowing costs

are charged to the consolidated statement of income in the period in which they

are incurred. Intangible assets

Intangible assets represent costs incurred for the purpose of using rented stores (key

money). These assets are amortized over the term of the related contract lease. Foreign currency translation

Foreign currency transactions are translated into Saudi Riyals at the rates of

exchange prevailing at the time of the transactions. Monetary assets and liabilities

denominated in foreign currencies at the balance sheet date are translated at the

exchange rates prevailing at that date. Gains and losses from settlement and

translation of foreign currency transactions are included in the consolidated

statement of income. Provision for End-of-service Benefits

End-of-service benefits are provided in accordance with the Saudi Arabian Labor

Law and are reduced by the payments to employees. Differences in indemnities, if

any, are computed and paid to employees upon termination. Zakat

The Company is subject to the regulations of the Department of Zakat and Income

Tax (“DZIT”) in the Kingdom of Saudi Arabia. Zakat is provided on an accrual basis.

The zakat charge is computed on the zakat base. Any difference in the estimate is

recorded when the final assessment is approved, at which time the provision is

cleared.





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3. INVENTORIES, NET 2012

SR

2011

SR

Main warehouses goods 98,093,529 96,285,893

Branches goods 223,696,276 215,067,367

321,789,805 311,353,260

4. PREPAYMENTS AND OTHER RECEIVABLES

2012

SR

2011

SR

Prepaid expenses 60,119,025 67,844,079

Advance payments to suppliers 6,837,666 16,407,151

Stores rent receivables 3,261,995 4,066,828

Employees’ receivables 1,797,558 1,798,121

Margin on letters of credit and letters of guarantees 3,982,168 8,869,905

Others 3,886,983 6,478,812

79,885,395 105,464,896

Prepayments include an amount of SR 16.4 million (2011: SR 21.4 million) which

represents rents paid to a related party in advance against early payment discount.

5. RELATED PARTY TRANSACTIONS During the period, the Company transacted with the following related parties. The

terms of these transactions and expenses were executed in accordance with the

Company’s management approval:

Company’s name Relationship

Al Othaim Holding Company Founding Shareholder

Abdullah Al Othaim Real Estate Investment

and

Development Co. Associated Company

The significant transactions and related amounts are as follows:

Transactions

2012

SR

2011

SR

Rent expenses 11,442,528 9,923,481

Rent income 37,560,575 37,445,958





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6. INVESTMENTS IN ASSOCIATED COMPANIES AND OTHERS

Investments consist of the following:

Notes

2012

SR

2011

SR

Investment in an associated company a 122,458,619 114,446,091

Investment in an associated company of a

subsidiary b 48,512,566 -

Investment in National Laboratories Co, Net c 2,470,509 3,400,000

Investments in available-for-sale securities 576,338 699,158

Investments in non-consolidated subsidiaries - 400,000

174,018,032 118,945,249

a- Investment in an associated company

2012

SR

2011

SR

Balance, January 1 114,446,091 101,790,508

Company's share in net profits 27,137,528 12,655,583

Cash dividends received (19,125,000) -

Balance, December 31 122,458,619 114,446,091

The investment in associated company represents 13.65% of the share capital of

Abdullah Al-Othaim Real Estate Investment and Development Company. The

remaining percentage is owned by Al-Othaim Holding Company, Mr. Abdullah

Saleh Al-Othaim and his family members.

b- This item represents investments in companies associated to the subsidiaries of Abdullah Al Othaim Markets Company. These companies are engaged in Food

business.

c- The Company invested in 6% of the share capital of National Laboratories Company, a limited liability company registered in Dammam city. Through

periodic review of the value of the investment, it has been determined that the

company is incurring continuous losses, which resulted in an impairment of the

investment by SR 929,491 reported in the consolidated statement of income.





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7. PROPERTY AND EQUIPMENT, NET

Lands

SR

Machinery and

equipment SR

Buildings SR

Vehicles SR

Computers SR

Furniture

and fixtures SR

Leasehold

improvements SR

Total SR

Cost

January 1, 2012 318,838,660 188,067,334 484,368,323 52,312,989 80,754,810 112,059,566 108,936,778 1,345,338,460

Additions 19,195,125 18,205,693 53,070,268 10,376,155 10,074,234 11,494,432 14,123,507 136,539,414

Disposals - (4,430,324) - (618,900) (5,667,642 ) (3,925,437) (108,229 ) (14,750,532)

December 31, 2012 338,033,785 201,842,703 537,438,591 62,070,244 85,161,402 119,628,561 122,952,056 1,467,127,342

Accumulated

depreciation

January 1, 2012 - 81,600,863 58,960,507 35,464,849 36,313,580 66,278,619 41,963,429 320,581,847

Charge for the period - 18,711,596 28,711,833 7,469,309 6,264,275 10,800,139 10,796,538 82,753,690

Disposals - (2,706,064) - (537,275) (4,942,173) (3,881,267) (1,260) (12,068,039)

December 31, 2012 - 97,606,395 87,672,340 42,396,883 37,635,682 73,197,491 52,758,707 391,267,498

Net book value

December 31, 2012 338,033,785 104,236,308 449,766,251 19,673,361 47,525,720 46,431,070 70,193,349 1,075,859,844

December 31, 2011 318,838,660 106,466,471 425,407,816 16,848,140 44,441,230 45,780,947 66,973,349 1,024,756,613

• On March 29, 2010, the Company purchased investment lands in Madinah from a related party (Abdullah Al Othaim Real Estate Investment and

Development Co.), for an amount of SR 98 million for the purpose of constructing a shopping mall project and the investment in residential and office

buildings. The approval for the purchase of lands was granted in the second shareholders' ordinary general assembly meeting held on April 7, 2010.

Some title deeds of the land were transferred to the name of the Company while other title deeds amounting to SR 37 million are still under progress.

• Land mentioned above amounting to SR 166 million (2011: SR 165 million) are mortgaged to some local banks as collateral against banks facilities (Note

9b). No capital commitments associated with these projects exist as at the consolidated balance sheet date.

• Additions include an amount of SR 68,268,504 (2011: SR 18,231,505) transferred from projects in progress.





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8. PROJECTS IN PROGRESS

Projects in progress mainly represent costs incurred for developing new stores and

constructing logistic facilities. The contractual commitments relating to projects in

progress as at December 31, 2012 amounted to SR 10.2 million (December 31, 2011:

SR 17.3 million).

During the year, an amount of SR 68,268,504 (2011: SR 18,231,505) was transferred to

property and equipment (Note 7).

9. LOANS AND MURABAHAS

a) Short-term murabahas

The Company has facilities from local commercial banks in the form of short-term

murabahas to finance its working capital. Unutilized balance of these murabahas

loans as at December 31, 2012 amounted to SR 191.8 million (December 31, 2011: SR

178.6 million).

b) Long-term loans and murabahas:

December 31, 2012

Current portion

SR

Non-current

portion

SR

Total

SR

Bank Al-Bilad Loan 56,217,694 22,676,939 78,894,633

Saudi Hollandi Bank Loans 31,000,000 60,000,000 91,000,000

SAMBA Financial Group Loan 18,181,818 18,181,818 36,363,636

105,399,512 100,858,757 206,258,269

December 31, 2011

Current portion

SR

Non-current

portion

SR

Total

SR

Saudi Industrial Development

Fund Loan 400,000 243,500 643,500

Bank Al Bilad Loan 53,001,644 74,987,087 127,988,731

Saudi Hollandi Bank Loans 34,666,667 91,000,000 125,666,667

Saudi British Bank Loan 15,277,778 - 15,277,778

103,346,089 166,230,587 269,576,676

These facilities are secured by personal guarantees of one of the shareholders and

mortgage of lands title deeds owned by the Company with a book value of SR 166

million as at December 31, 2012 (December 31, 2011: SR 165 million).





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10. OTHER PAYABLES AND ACCRUED EXPENSES

2012

SR 2011 SR

Due to employees 33,639,195 33,531,219

Othaim cards (received in advance) 17,241,279 11,923,456

Deferred revenues – Iktissab credit 20,499,117 11,524,339

Advanced payments of shops’ rent 3,952,278 5,202,911

Accrued utilities expenses 5,059,463 5,056,021

Zakat provision (Note 11) 4,281,225 4,301,273

Refundable deposits 6,311,341 4,024,569

Others 10,353,517 7,498,699

101,337,415 83,062,487

11. ZAKAT

The principal elements of the zakat base are as follows:

2012 SR

2011 SR

Calculation of zakat base

Shareholders’ equity beginning of year 508,603,222 381,020 ,050


Long term liabilities 247,326,664 305,038,048

Non-current assets (1,298,271,823) (1,215,177,924)

Some figures were adjusted to arrive to the Zakat base.

Due to negative zakat base, Zakat provision is computed based on adjusted net

income.

The movement in provision for zakat is as follows:

2012 SR

2011 SR

Balance at January 1 4,301,273 4,513,693

Payments during the year (3,770,048) (3,712,420)

Provision for the year 3,750,000 3,500,000

Balance at December 31 4,281,225 4,301,273

The Company received the final assessments until 2007. The Company has also filed

its zakat returns for the years 2008, 2009, 2010 and 2011 which are still under review by

DZIT.





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12. STATUTORY RESERVE

In accordance with Regulations for Companies in Saudi Arabia, the Company has

established a statutory reserve by the appropriation of 10% of net income until the

reserve reaches 50% of the share capital. This reserve is not available for dividend

distribution.

13. VOLUNTARY RESERVE

The extraordinary general assembly in its meeting held on Jumad Al-Awal 2, 1430

(corresponding to April 27, 2009) approved a voluntary reserve of 20% from year 2008

net income and appropriated it for the expansion of the Company’s operations.

14. EARNINGS PER SHARE

Earnings per share are calculated based on the net income and the income from

continuous main operations for the year divided by the weighted average number of

shares for the year ended December 31, 2012 and 2011 amounting to 22.5 million

shares.

15. DIVIDENDS

In its meeting held on October 3 , 2012, the shareholders’ General Assembly

approved the distribution of cash dividends of SR 22.5 million, which represents SR 1

per share for the year ended December 31, 2011.

In its meeting held on March 28, 2011, the shareholders’ General Assembly

approved the distribution of cash dividends of SR 67.5 million, which represents SR 3

per share for the year ended December 31, 2010.

16. SUBSEQUENT EVENTS

The board of directors proposed in its meeting held on February 4, 2013 cash

dividends of SR 67.5 million for the year ended December 31, 2012 which represents

SR 3 per share.

17. SELLING AND DISTRIBUTION EXPENSES

2012

SR

2011

SR

Salaries and benefits 63,175,189 61,833,554

Advertisements, media and marketing support 14,806,489 20,066,404

Depreciation and amortization 11,458,985 10,756,633

Rent 5,598,350 4,953,983

Branches freight expenses 5,046,748 4,506,352

Maintenance and repairs 3,157,756 4,111,727

Fuel, oils and supplies 3,545,251 3,040,920

Utilities 3,001,760 2,758,404

Insurance expenses 1,007,591 1,009,457

Others 3,080,177 1,983,405

113,878,296 115,020,839





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18. GENERAL AND ADMINISTRATIVE EXPENSES 2012

SR

2011

SR

Salaries and benefits 37,493,504 36,726,206

Rent 2,304,116 2,248,640

Depreciation and amortization 3,622,507 2,976,663

Professional fees 653,830 446,375

Utilities 1,963,406 1,365,537

Subscription fees 1,872,767 1,335,970

Maintenance and repairs 1,270,249 1,245,725

Hospitality 608,081 778,741

Others 2,059,736 988,836

Fuel, oils and supplies 863,211 878,155

Donations to approved charities 2,378,114 1,354,692

Insurance 155,419 157,088

55,244,940 50,502,628

19. SEGMENTAL INFORMATION

The Company’s activities are focused on retail and wholesale of food stuff and

carries out its operations in the Kingdom of Saudi Arabia, in addition to constructing

commercial malls and investing in their sales or leases. Some selected information

was summarized for each business segment as at December 31:

For the year ended December 31, 2012

Retail and

wholesale

SR

Real estate

and leasing

(Rent)

SR

Total

SR

Sales 4,105,198,404 - 4,105,198,404

Rents income 93,769,817 67,208,451 160,978,268

Property and equipment, net 547,270,505 528,589,339 1,075,859,844

Gross Profit 297,520,762 27,726,735 325,247,497

For the year ended December 31, 2011

Retail and

wholesale

SR

Real estate and

leasing (Rent)

SR

Total

SR

Sales 3,942,797,390 - 3,942,797,390

Rents income 84,978,990 63,136,451 148,115,441

Property and equipment, net 496,515,101 528,241,512 1,024,756,613

Gross Profit 294,840,132 28,304,973 323,145,105





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20. COMMITMENTS AND CONTINGENCIES

a) As at December 31 the Company had the following commitments and

contingent liabilities:

2012

SR

2011

SR

Letters of credit 7,850,789 47,474,987

Letters of guarantee 13,930,450 20,668,300

Capital commitments on projects in progress 10,168,222 17,349,963

b) Commitments against operating lease agreements

The outstanding lease commitments of the Company related to non-cancelable

long-term operating leases for the Company’s branches and malls as at

December 31 are as follows:

2012

SR

2011

SR

Less than one year 47,294,579 46,153,869

More than one year, but less than 5 years 170,600,620 166,425,990

More than 5 years, but less than 20 years 215,974,766 268,568,645

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

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. As the

Company’s financial instruments are compiled under the historical cost convention,

differences can arise between the book values and fair value estimates.

Management believes that the fair values of the Company’s financial assets and

liabilities are not materially different from their carrying values.

Financial instruments reported in the balance sheet principally include cash on hand

and at banks, prepayments and other receivables, payables, trade payables and

accrued expenses, short-term and long-term loans and Murabahas.

Credit risk is the risk that one party will fail to discharge an obligation and cause the

other party to incur a financial loss. The Company has no significant concentration

of credit risk. Cash is substantially placed with local banks with sound credit ratings.

Prepayments and other receivables are carried net of provision for doubtful debts, if

any.





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Commission rate risk is the exposure to various risks associated with the effect of

fluctuations in the prevailing commission rates on the Company’s financial position

and cash flows. The Company monitors the fluctuations in commission rates and

believes that the effect of the commission rate risk is not material.

Currency risk is the risk that the value of financial instruments will fluctuate due to

changes in foreign exchange rates. The Company’s transactions are principally in

Saudi riyals and U.S. dollars. Management monitors the fluctuations in currency

exchange rates and believes that the currency risk is not material.

Liquidity risk is the risk that Company will be unable to meet its funding requirements

primarily for loan commitments. The Company maintains adequate funding to meet

such obligations when they become due.

22. APPROVAL OF THE FINANCIAL STATEMENTS

Financial statements had been approved by the Board of Directors on February 4,

2013.

23. COMPARATIVE FIGURES

Certain figures for 2011 have been reclassified to conform with the presentation in

the current year.

abdullah al-othaim markets company (saudi joint...

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