Emaar, The Economic City announces its Interim Financial results for the Period Ending on 30 September 2024 (Nine Months)

Element List	Current Quarter	Similar quarter for previous year	%Change	Previous Quarter	% Change
Sales/Revenue	91	341	-73.313	76	19.736
Gross Profit (Loss)	-82	218	-	-47	74.468
Operational Profit (Loss)	-269	160	-	-110	144.545
Net profit (Loss)	-459	27	-	-342	34.21
Total Comprehensive Income	-470	25	-	-340	38.235
All figures are in (Millions) Saudi Arabia, Riyals

Element List	Current Period	Similar period for previous year	%Change
Sales/Revenue	241	926	-73.974
Gross Profit (Loss)	-167	470	-
Operational Profit (Loss)	-526	313	-
Net profit (Loss)	-1,153	-49	2,253.061
Total Comprehensive Income	-1,162	-41	2,734.146
Total Shareholders Equity (after Deducting Minority Equity)	5,244	6,614	-20.713
Profit (Loss) per Share	-1.02	-0.04
All figures are in (Millions) Saudi Arabia, Riyals

Element List	Amount	Percentage of the capital (%)
Profit (Losses) Resulting From The Change In Investment Propertie’s Fair Value	-	-
Accumulated Losses	-6,101	-53.83
All figures are in (Millions) Saudi Arabia, Riyals

Element List	Explanation
The reason of the increase (decrease) in the sales/ revenues during the current quarter compared to the same quarter of the last year is	The decline in revenue by 73% for the current quarter compared to the corresponding quarter of 2023 is attributable to the following:

- Decline in project revenue due to delay in signing of new contracts in the commercial and industrial valley sectors.

- Decline in operational revenue due to slower hospitality business.

- The corresponding quarter of 2023 included an additional revenue impact of SAR 263m due to periodic reassessment of life cycle cost estimates for residential and industrial projects.The reason of the increase (decrease) in the net profit during the current quarter compared to the same quarter of the last year is The net loss for the quarter increased by 1,800% compared to the same quarter of last year. This is mainly attributable to:

- Decline in revenues for the reasons provided above.

- Increase in operational expenses by SAR 85m due to higher professional fees for activities related to the Capital Optimization Plan, increase in marketing expenses due to city activation initiatives, increase in employee cost, and legal provisions.

- Increase in provision for expected credit loss by SAR 8m due to lower collection rate from overdue receivables.

- Increase in finance costs by SAR 38m attributed to rise in SAIBOR and additional utilization of shareholder loan.

- Loss of SAR 17m in the share of equity accounted investees.The reason of the increase (decrease) in the sales/ revenues during the current quarter compared to the previous one is The increase in the current quarter’s revenue by 20% compared to the previous quarter is mainly attributed to the net increase in sales of residential units.The reason of the increase (decrease) in the net profit (loss) during the current quarter compared to the previous one is Net loss increased by 34% compared to the previous quarter. This is attributable to the following:

- Increase in professional expenses for the activities related to the Capital Optimization Plan.

- Additional legal provision of SAR 32m.

- Loss of SAR 13m due to change in the value of interest rate hedging instrument driven by SAIBOR movement.The reason of the increase (decrease) in the sales/ revenues during the current period compared to the same period of the last year is The decline in revenue by 74% for the current period compared to the corresponding period of 2023 is attributable to the following:

- Decline in projects revenue due to delay in signing of new contracts in the commercial and industrial valley sectors during the current period.

- Decline in operational revenue due to lower hospitality business.

- The corresponding period of 2023 included the additional revenue impact of SAR 263m as a result of periodic reassessment of life cycle cost estimates for residential and industrial projects.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 increased by 2,253% compared to the same period of the previous year. This is mainly attributable to:

- Decline in revenues for the reasons provided above.

- Increase in operational expenses by SAR 73m due to higher professional fees for the activities related to the Capital Optimization Plan initiatives, increase in marketing expenses due to city activation initiatives, increase in employee cost and legal provisions.

- The increase in provision for expected credit loss by SAR 37m due to lower collection rate from overdue receivables.

- Increase in finance costs by SAR 146m attributed to rise in SAIBOR and additional utilization of shareholder loan.

- Loss of SAR 69m in the share of equity accounted investees.Statement of the type of external auditor's report Unmodified conclusionComment mentioned in the external auditor’s report, mentioned in any of the following paragraphs (other matter, conservation, notice, disclaimer of opinion, or adverse 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 1,153 million during the nine-month period ended 30 September 2024 and, as of that date, the Group’s current liabilities exceeded its current assets by SR 7,830 million. In addition, the Group has not complied with the requirements of covenants related to long-term borrowing facilities, resulting in the borrowings with outstanding balance of SR 2,934 million (out of total balance amounting to SR 3,687 million) as at 30 September 2024 being immediately due and payable on demand in accordance with the terms and conditions of the borrowing agreements. The Group’s ability to meet its obligations as they fall due and to continue its operations without significant curtailment is therefore highly dependent on the successful execution of management’s plans including debt restructuring, obtaining additional funding from shareholders and the sale of properties to generate sufficient cash flows. Further, the accumulated losses reached SR 6,101 million as at 30 September 2024 exceeding 50% of Group’s share capital, The Board of Directors of the Group is in the process to comply with the applicable requirements of Article 132 of Companies law (issued on 1 Dhul Hijjah 1443 (corresponding to 30 June 2022)), which become applicable when accumulated losses reach 50% of share capital. 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.Reclassification of Comparison Items Certain comparative figures have been reclassified, wherever necessary, to conform to the presentation adopted in the condensed consolidated financial statements for the current period.Additional Information - The accumulated losses, as of 30 September 2024, amounted to SAR 6,101m, which is equivalent to 53.83% of the Company’s capital, amounting to SAR 11,333m.

- Date of Losses exceeding 50% of Capital: 30-09-2024.

- Date of notification ‎of the Board of ‎directors of ‎accumulated losses: ‎24-10-2024

- Amount of ‎accumulated losses: SAR 6,100,734,257.

- Ratio of ‎accumulated losses ‎to capital (%)‎: 53.83%‎.

- Last day for board of directors to publish the recommendation for the Accumulated Losses: 23 December 2024. However, it should be noted that the Board has already announced its recommendation, as further explained below.

- The date of the last day on which the Board of Directors may invite the extraordinary general assembly to convene: 01 April 2025.

- The date of the last day for convening the extraordinary general assembly to address the Accumulated Losses: 22 April 2025.

- The main reasons of these accumulated losses are as follows:

1) During 2017, as a result of first-time adoption of IFRS, a retrospective expense adjustment of SAR 1.4B was made, mainly due to change in impairment testing methodology of operating assets and change in revenue recognition policy, which resulted in accumulated losses in 2017.

2) During 2019, capitalized borrowing costs pertaining to development properties amounting to SAR 252M was charged to accumulated losses as a result of retrospective adjustment under IAS 23. Furthermore, an impairment of development properties and operating assets, amounting to SAR 177M and SAR 187M respectively were also major contributor to accumulated losses.

3) During the year 2022, the Group restated certain amounts and balances included in the prior year consolidated financial statements in order to reflect appropriate accounting and classification resulting in an impact of SAR 102m.

4) The Group recorded an additional Zakat provision of SAR 210m in 2022 and 2024, related to open assessment years 2014-2020.

5) In addition to this, financial charges pertaining to outstanding loans, losses related to operating assets being at the initial phase, and depreciation, operations, and maintenance of city infrastructure are other major contributors to the accumulated losses of the company as of September 30, 2024.

- Means to extinguish the accumulated losses:

- The Company preemptively formulated a plan to address the accumulated losses, which was already announced on Saudi Exchange website on 08 September 2024 as part of the Capital Optimisation Plan (COP).

- The elements of the capital optimisation plan are summarized as follows:

1. Bank Debt Restructuring: The Company signed a non-binding term sheet to reschedule its financing agreements with Alinma Bank, Saudi Awwal Bank, Banque Saudi Fransi and The Saudi National Bank (together, the “Banks”), to reschedule all amounts due to the Banks from the Company, currently standing at approximately SAR (3,471) million, under one new common terms agreement, As part of the rescheduling, a new credit facility would be made available to the Company by the Banks to, with total commitment of approximately SAR (301.4) million.

2. New Shareholder Loan: The Company signed a non-binding term sheet with the Public Investment Fund (the “PIF”) in relation to a potential shareholder loan of up to SAR 1,000 million.

3. Capital Decrease: The capital decrease is designed to fully extinguish company’s accumulated losses, resulting in a clean balance sheet and enabling the Company to return to a position to report retained earnings in future periods.

4. Debt Conversion: The Company’s Board recommended the increase of the Company’s capital through converting the debt of the PIF, which totals SAR (3,972,415,091), to ordinary new shares, which represents the amounts due by the Company to the PIF under: (a) the shareholder loan agreement with the PIF, and (b) the debt recently novated from the Ministry of Finance to the PIF.

- For more details on the elements of the Capital optimization plan, kindly refer to the Company announcement on the Saudi Tadawul on 08 September 2024 Corresponding 05 Rabi Alawwal 1446AH (link).

- The Company will continue to comply with instructions defined in the Procedures Related to Listed Companies with Accumulated Losses Reaching 20% or more of their 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.