Emaar The Economic City announces its Interim Financial Results for the Period Ending on 2023-06-30 ( Six Months )

Element List	Current Quarter	Similar quarter for previous year	%Change	Previous Quarter	% Change
Sales/Revenue	428	78	448.72	157	172.61
Gross Profit (Loss)	237	-51	-	21	1,028.57
Operational Profit (Loss)	214	-189	-	-61	-
Net Profit (Loss) after Zakat and Tax	95	-251	-	-171	-
Total Comprehensive Income	108	-251	-	-173	-
All figures are in (Millions) Saudi Arabia, Riyals

Element List	Current Period	Similar period for previous year	%Change
Sales/Revenue	585	165	254.54
Gross Profit (Loss)	258	-87	-
Operational Profit (Loss)	153	-308	-
Net Profit (Loss) after Zakat and Tax	-76	-417	-81.77
Total Comprehensive Income	-66	-417	-84.17
Total Share Holders Equity (after Deducting Minority Equity)	6,589	7,360	-10.47
Profit (Loss) per Share	-0.07	-0.37
All figures are in (Millions) Saudi Arabia, Riyals

Element List	Explanation
The reason of the increase (decrease) in the net profit during the current quarter compared to the same quarter of the last year is	Net profit for Q2 2023 is SAR 95M as compared to the net loss of SAR (251M) in the corresponding quarter. Key factors impacting the net results for the current quarter are summarized below:

1) EEC Group has reported a gross profit of SAR 237M during Q2 2023 against a loss of SAR (51M) when compared with a similar quarter of last year which represents an increase in gross margin by SAR 288M. The variance is mainly due to the following:

• Projects’ gross profit increased by SAR 278M, from a gross loss of SAR (2M) (Q2 2022) to a gross profit of SAR 276M (Q2 2023) driven by an increase in sales of real estate assets mainly related to sale of an industrial plot for development and another land sold to an investor in the touristic area.

• Gross loss generated by the Group’s operating assets decreased by SAR 10M mainly driven by the rationalization of operating expenses

2) General and administrative expense for the current period is SAR 80M compared with an expense of SAR 106M in the corresponding quarter of last year. The SAR 26M decrease is mainly due to lower provisioning with respect of legal and Zakat cases, however, the impact was partially offset by an increase in professional charges.

3) A decrease in impairment loss is due to lower provision required under the Expected Credit Loss (ECL) model resulting from a reduction in the account receivable balance. The impairment/ provision is calculated using the Expected Credit Loss (ECL) model as required under “IFRS 9 Financial instruments”.

4) The increase in financial charges by SAR 52M is mainly due to an increase in SAIBOR compared to the corresponding quarter of last year.The reason of the increase (decrease) in the net profit during the current quarter compared to the previous quarter of the current year is Net profit for Q2 2023 is SAR 95M as compared to the net loss of SAR (171)M in the previous quarter. Key factors impacting the net results for the current quarter are summarized below:

1) EEC Group has reported a gross profit of SAR 237M during Q2 2023 against a gross profit of SAR 21M when compared with the previous quarter of the current year which represents an increase of SAR 216M. The variance is mainly due to the following:

• Projects’ gross profit increased by SAR 219M, from a gross profit of SAR 56M (Q1 2023) to a gross profit of SAR 275M (Q2 2023) driven by the increase in sales of real estate assets mainly related to sale of an industrial plot for development and another land sold to an investor in the touristic area.

• The above positive impact in GP was offset as the gross loss generated by the operating assets increased by SAR 3M to SAR 38M in Q2 2023.

2) The Group’s general and administrative expenses increased by SAR 24M mainly due to increase in professional charges.

3) Financial charges increased by SAR 15M mainly due to an increase in SAIBOR and slight increase in outstanding loan balances.

4) Decrease in impairment loss (reversal) is due to lower provision required under the ECL resulting from a reduction in account receivable balances.

5) Increase in other income is mainly due to Donation Income of SAR 37.5M received from the endowment fund related to a subsidiary and reversal of a SAR 19M provision no longer required.The reason of the increase (decrease) in the net profit during the current period compared to the same period of the last year is Net loss for YTD 2023 is SAR (76M) as compared to the net loss of SAR (417M) for the same period last year. The improvement is mainly due to increase in sales of real estate assets, increase in other operating income and reduction in selling, general and administrative expenses. The positive impacts were partially offset by increase in finance charges.Statement of the type of external auditor's report Unmodified conclusionModification, Qualification or Emphasis of a Matter as Stated within the External Auditor Opinion We draw attention to Note 1 of the condensed consolidated interim financial statements, which indicates that the Group incurred a net loss of SR 76.2 million during the six-month period ended 30 June 2023 and, as of that date, the Group’s current liabilities exceeded its current assets by SR 6,948 million. These events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our Conclusion is not modified in respect of this matter.

Comparative Information

We draw attention to Note 20 to the condensed consolidated interim financial statements, which indicates that the comparative information presented for the three-month and six-month periods ended 30 June 2022 has been restated. Our conclusion is not modified in respect of this matter.Reclassification of Comparison Items Certain comparative amounts have been reclassified/restated to conform to the current period’s presentation.Additional Information The accumulated losses, as of 30 June 2023, amounted to SAR 4,756 million, which is equivalent to 41.96% of the Company’s capital, amounting to SAR 11,333 million.

The main causes of these accumulated losses are as follows:

Under Saudi Organization for Certified Public Accountants (SOCPA) accounting framework, EEC had a positive retained earning balance of SAR 16.8M as at 31 Dec 2015. During 2017, SOCPA made it mandatory for listed companies to adopt the International Financial Reporting Standards (IFRS) retrospectively with effect from 01 Jan 2016. Due to the switch from SOCPA accounting framework to IFRS, positive retained earnings got converted into accumulated losses of SAR 1.4B as of 01 Jan 2016, mainly due to change in impairment testing methodology of operating assets and change in revenue recognition policy. However, part of the accumulated losses pertaining to revenue recognition were reversed in subsequent periods in line with the projects progress.

In addition to this, during 2019, the IFRS Interpretation committee published an agenda decision “Over Time Transfer of Constructed Good - IAS 23 Borrowing Costs” which states that under construction inventories of real estate properties are not qualifying assets for capitalization of borrowing costs as these are ready for its intended sale in its current condition. Accordingly, capitalized borrowing costs pertaining to development properties (inventories), amounting to SAR 252M, as of 31 December 2019, had been offloaded and charged to accumulated losses. Furthermore, the prevailing COVID 19 situation has resulted in impairment of development properties and operating assets, amounting to SAR 177M and SAR 187M respectively, which had been recognized in the books of accounts.

In addition to this, financial charges pertaining to outstanding loans, losses related to operating assets being at the infancy stage, and depreciation, operations, and maintenance of city infrastructure are other major contributors to the accumulated losses of the company as of June 30, 2023.

The company will apply the procedures and instructions issued by the Capital Market Authority for companies listed on the Saudi Stock Exchange, whose accumulated losses amounted to more than 20% of its share capital.

The Capital Market Authority and Saudi Exchange take no responsibility for the contents of this disclosure, make no representations as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this disclosure, and the issuer accepts full responsibility for the accuracy of the information contained in it and confirms, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts or information the omission of which would make the disclosure misleading, incomplete or inaccurate.