Awad Bin Zafrah for Trading:

Risk Comments justifications:

1. As per the client regarding the high dividend payout, KPMG (the
auditor) refused to issue an unqualified opinion without declaring
the Due from the holding company as Dividends. Thus, the
financials are currently showing dues from sister companies only.
2. For the breach of (Advances to related companies) covenant
client has already informed and confirm that Due from related
parties will be largely regularized during Q2 2015.
3. Client has already been requested to provide us with the ageing
of inventory but not yet received.
4. After adjusting the TNW by deducting the dues to related parties
leverage ratio reached 4.55x (Covenant of 1.5x). However, Client
has been informed regarding the breach of condition.
5. The drop of NPM to reach 5.5% compared to 11% in 2013 was
affected by the decrease in gross margin profit. Client has
recently depends on locally imported products which have lower
profit margin compared to the imported goods to avoid delays in
receiving goods.
Summary & Recommendation:
1. As mentioned, Client has been informed regarding the breach of
conditions.
2.
3.
4. Client has recently depends on locally imported products which
have lower profit margin compared to the imported goods to
avoid delays in receiving goods.
Risk Recommendations and additional conditions:
1. We dont recommend having J&S PG of Mr. Amer Saad Bin Zafrah
since Al Ola for modern Industries is a different company where it
has its own facilities.
2. Noted.
3. Noted.

Awad Bin Zafrah Contracting:

Risk Comments justifications:
1.
2.
3.
4.

Client has been informed regarding the breach of conditions

Will be justified by client first thing in the morning.

Yes, dividend payout has decreased TNW and increases the
leverage hence Client has been informed regarding the breach of
covenant.
5. Noted
6. OD excesses are normal in contracting business.
7. The increase in unbilled revenew was manily due to late billing
approvals by Mobily.
8. The reduction of NPM in 2014 was mainly due to the increase in
the salaries of the year which increased form SAR 744MM in
2013 to SAR 2,965M (22.7%) in 2014 in addition to the provisions
which increased from SAR 339M in 2013 to SAR 3,189M in 2014
(24.5%). Provisions are mainly related to one contract that is
expected to be completed in 2015 with a loss of SAR 2.7M, due
to penalties for leaving machineries unattended on site.
9. Noted
10.
Noted
11.
Noted
The rejection of supporting the enhancement of 7MM to the
SOT additional conditions:
1.
2.
3.
4.
5.
6.
7.

OK
Noted
Noted
Noted
Noted
Justify the increase in the risk rating from (3) to (5)?